In a move reminiscent of the deal that VHS backers made with the pornography industry to destablize the Mexican standoff with Betamax, Skype has made a deal with bad-boy peer-to-peer file sharing phenom Kazaa:

[from RED HERRING | Bride of Kazaa]

Skype, which is headquartered in Luxembourg, currently claims 30 million downloads, with 900,000 more downloads per week. Kazaa boasts 300 million users. Bob Hafner, an analyst with Gartner, says Skype gains more than numbers. The typical Kazaa user is precisely the customer Skype is looking for - early adopters looking for low-cost services. Since Skype's basic services are free, the company will depend on additional services to grab revenue. Skype recently introduced its SkypeOut prepay service, which for 2 cents a minute allows users to call traditional landline and cell phones. Though SkypeOut has just begun to win over users, Skype will continue to provide potential revenue-builders like a voicemail service and a SkypeIn telephone number to receive incoming calls.

Still, Skype may pay a price for its new customer base, as Kazaa's legal past could bring trouble for the VoIP firm. Sowmyanarayan Sampath, a consultant with management and strategy firm Adventis, compares bundling Kazaa with Skype to giving away candy in cigarette packages. "Inserting a product with no legal issues into a product of legal issues will give you problems," he says.