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Baidu, China’s largest search engine, on Tuesday announced a major licensing deal with with One-Stop China–a joint venture between the Universal Music Group, the Warner Music Group, and Sony BMG. The deal will allow China-based web users to legally download and stream hundreds of thousands of songs for free. Under the agreement, Baidu will pay a fee to the music labels each time a song is downloaded or streamed. Baidu will also share revenue from online ads if that revenue exceeds a certain amount.
China has long been a haven for illegal downloading, with Baidu as the major conduit for such downloads. The International Federation of the Phonographic Industry (“Federation”), which represents global music companies, estimates that 99% of the music found online in China is illegal. With illegal music readily available, the music industry has notoriously struggled in China. Global music industry revenue out of China was just $64 million in 2009. By contrast, the global music industry had roughly $4.2 billion in revenue from the U.S. market in 2009.
“Deep linking,” or providing search results that direct users to unlicensed songs on other websites, has been standard practice for Baidu. Chinese courts had previously ruled that “deep linking” was legal, as the illegal music was not stored on Baidu’s servers. While the practice is “legal,” as part of the deal Baidu has agreed to remove all “deep links” to music belonging to any of the One-Stop China labels. Also as part of the agreement, Baidu will introduce a premium fee-based service called “Ting” which will allow paying users to download music onto computers and other various electronic devices.
Whether the deal will have any effect on legitimizing China’s music industry in the long-run remains to be seen. I am skeptical. Baidu has taken the first step to reform the way music works in China, but it is far from sufficient. Baidu is but one search engine (albeit the largest). Other search engines can still legally “deep link” to illegal downloading sources. In a country where the consumer has become accustomed to free music, it seems unlikely that the consumer will start to pay for the same music merely because buying music has become easier. Illegal downloading is still possible in China, just not necessarily through the same conduit. While this deal is significant, it will take something much more to curb music piracy in China.
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