As for the ability to trade digital movies, McNair doesn't expect that to happen for years. "It wouldn't surprise me if we offered the music in 2007, something where people can transact and trade MP3 files legally," McNair said. "But we'll continue to offer physical trading of DVDs, too."
Adding digital flicks to the mix won't be as easy. It's not because Peerflix doesn't have the means. The technology was developed for McNair's previous company called Spinway, a private label Internet service provider (ISP) for large brick-and-mortar retailers, such as Costco, Kmart and Toys R Us, that in 1998 wanted to drive consumer sales to the Web with free Internet access.
An advertising model subsidized the Internet access. The consumer viewed a 30-second commercial distributed through P2P technology as they waited to get online. "Using idle modem bandwidth from a previous session, we distributed the file peer-to-peer," McNair said.
In the original Peerflix business model McNair hammered out with co-founder Danny Robinson, the technology would have distributed two-hour full-length movies, rather than commercials.
The prototype is built, McNair said. Peerfix has a set-top box that would enable people to take content and share it digitally in a peer-to-peer environment. "Even though we have a way to do it legally, if we're successful, we will be challenged and the studios will make us prove it's legal because it's so disruptive," he said.
Those challenges include the ability to transfer ownership of the digital content. But others remain, such as the movie studios have the ability to repurpose a movie file into a manageable size the average consumer can handle.
As Peerfix evolves into a digital content provider, it will become the transactional layer to let people trade video files on set-top boxes, MP3s, ring tones and other digital content, the founders said.
Launched in September 2005, Peerflix offers more than 35,000 titles. The first trade is free. After that, trades cost 99 cents each. And it's "perfectly legal" because DVD ownership transfers to the next person. "You come onto the network and list the DVDs for trade," he said. "You'll receive an e-mail from Peerflix that another member wants your copy of Finding Nemo," along with an address and shipping instructions.