A controlled content distribution system (CCDS) employs a peer-level application into which a content producer can import digital content (e.g., video, audio, graphic, image, text, code files, etc.) The content producer identifies distribution parameters including an initial distribution list and a level limit representing the maximum number of levels, or degrees of separation for allowed distribution in a FOAF social network. Distribution parameters also include an alteration definition for one or more allowable levels in the network. Alteration definitions may identify a file degradation characteristic, file augmentation, or deletion parameter for altering the digital content from its original form. Alteration definitions often vary at each level. A distribution package is created by the CCDS and includes the digital content, a configuration data file, a key ID and a license key seed. The distribution package is processed at a FOAF license server before being sent to additional content recipients.