Hollywood's choice: 99-cents or nothing

    The second episode of The Big C, Showtime's bittersweet hit comedy about a suburban mom with melanoma, aired Monday night at 10:30 p.m. Less than three hours later, a digital copy was posted on an Italian website, where it spread like crabgrass. By Wednesday morning, there were 3,387 "seeds" of The Big C, Season 01, Episode 02, on the Internet, each of them feeding a perfect copy of the original file to users around the world.

    The incident neatly summarizes the dilemma the TV networks face as they weigh Steve Jobs' latest pitch to put their content behind an Apple (AAPL) firewall. According to several published reports, Disney (DIS) and News Corp. (NWS) are close to signing a deal to make individual episodes of their most popular shows available for two-day rentals on iTunes for 99-cents each.

    But Apple is reportedly running into resistance from the other big TV studios, including CBS (CBS), which owns Showtime, NBC (GE) and Time Warner (TWX). The studio heads are said to be extremely wary of the 99-cent rental idea. One source described it to the New York Post as "insane."

    The networks may fear that cutting a deal with Apple will give Jobs the same kind of power in their industry that he wields over the music business, where 99-cent song downloads turned iTunes into the world's largest music store.

    But Apple may be the least of their worries. Their biggest fear -- whether they know it or not -- is the pirate network that made The Big C so widely available: a peer-to-peer file-sharing protocol called BitTorrent.

    BitTorrent is hardly new. The protocol was written more than nine years ago to share large files without putting too much strain on any one server. For most of that time, mainstream content providers could take comfort in the knowledge that the protocol was sufficiently user-hostile that the vast majority of their viewers were never going to try it twice.

    But that may no longer be the case. In some ways, BitTorrent has gone mainsteam. Amazon uses as the backbone of its Simple Storage Service. Facebook and Twitter use it to distribute software updates. According to one 2009 estimate, the BitTorrent protocol now accounts for anywhere from 27% to 55% of all traffic on the Internet, depending which country you're in.

    More to the point, it's no longer horribly difficult to master. There are now dozens of BitTorrent clients that make it relatively easy to find and download whatever show you want to watch. And the fact of their existence is no longer a closely-held secret. I learned about one popular BitTorrent client, Vuze, from a middle-aged woman who lives around the corner. She could hardly be described as a computer whiz. She still hasn't quite mastered her Facebook account, but she downloads movies and TV shows three or four times a week.

    The window of opportunity for Hollywood's holdouts may be closing. If they wait too long, BitTorrent could do to video what Napster did to music -- give users a way to get all their precious content for a good deal less than 99 cents a pop.