Baidu.cn – “The Google of China”

出差. chū chāi. business trip.

This is related to a previous post about Google Music in China.

For those who don’t know, the simplest way to describe Baidu in a soundbite is “the Google of China.”  Although somewhat of a misnomer (afterall Google does operate in China), it is a fitting place to begin.

Inspired by a poem written more than 800 years ago during the Song Dynasty, the poem compares the search for a retreating beauty amid chaotic glamour with the search for one’s dream while confronted by life’s many obstacles. “…hundreds and thousands of times, for her I searched in chaos, suddenly, I turned by chance, to where the lights were waning, and there she stood.” Baidu, whose literal meaning is “hundreds of times”, represents a persistent search for the ideal (according to the company’s own mission statement). [1]

Founded in 2000, Baidu became the first Chinese company to be traded on the NASDAQ-100 index in 2007.  It commands a 75.8% share of China’s search engine market, according to Beijing-based research firm Analysys International, [2] placing Google at a distant second, with just under 20% of the market-share.  And what is the market-share?  How about an estimated 477 million users as of mid-2011. [3]  ‘Search’ became the most widely used service for Baidu in 2010, at around 82%, with ‘music streaming and downloading’ at 79%.

These are just some of the reasons why a recent deal between Baidu executives and the world’s largest record labels may be groundbreaking.  It is to early to tell of course, but the closing negotiations that took place this month between Baidu and One-Stop China, a joint venture between the Universal Music Group, the Warner Music Group and Sony BMG, will aim to uphold the legal standards of copyright law.  The business model is creative, but not necessarily original.  See post about Google Music here.

Nevertheless, many of those surrounding the deal are calling it ‘landmark’ and a momentous step towards enforcing copyrights for artists in the oftentimes chaotic and unpredictable digital landscape that float’s in cyberspace above mainland China.

“Under the two-year deal between Baidu and One-Stop China, the three music labels will license over 500,000 songs, about 10 percent of them in Mandarin and Cantonese, which will be stored on Baidu’s servers and available for free streaming and download on the site’s ad-supported MP3 search page and social music platform, Ting.

Baidu will pay a fee to the labels for each time a song is downloaded or played in a stream. It will also share revenue from online ads if that revenue exceeds a certain amount, as well as provide promotional support for the labels.”

In terms of functionality and structure it may not seem dissimilar to Google’s music platform that launched 3-years ago.  However, those close to the ground identify that “some pretty big names out there are still missing in action on Ting like AC/DC, Motley Crue or The Blues Brothers just to name a few. Moreover, a slew of local bands like Xie Tian Xiao, Reflector, Yaksa, Zhou Yun Peng, Miserable Faith, Muma etc… are also not available yet. [4]

But even if these developments are just “a pale copy of Google Music…with a lesser catalog and nothing to set it apart” it is still of massive proportions and inclined to influence the music industry in China.

The International Federation of the Phonographic Industry, which represents global music companies, estimates that 99 percent of the music found online in China is illegal, much of it available through Baidu. Although China has more broadband connections than the United States and a rapidly growing middle class, the global recorded music industry’s revenue in the country for 2009 was worth just $75 million, compared with $4.6 billion in the United States, according to the federation. [5]  This is an even smaller market than Ireland for a country with 1.2 billion inhabitants  [6]

According to industry analysts, making money from music downloads and streaming in China will have an outsize impact for the labels, since digital sales accounted for 76 % of the country’s legitimate music revenue in 2010, compared with just 29 percent globally, where CD sales remain dominant.

As part of the July 2011 deal the labels and Baidu agreed to a settlement endorsed by the Beijing Higher People’s Court ending all outstanding litigation. For years, the American and Chinese music industries have singled out Baidu for criticism, saying the company has enabled users to steal vast quantities of copyrighted music, accusations that spurred a number of unsuccessful lawsuits.

“We’ve managed to forge a commercial partnership with Baidu that respects the value of copyright,” said Lachie Rutherford, a director of OneStop, the joint venture company created by Sony, Universal and Warner to handle distribution deals in China, and President of Warner Music Asia Pacific.  “We are working together on a really attractive music service and have agreed ways to counteract infringement, giving the service the best chance of success,” he said.

Baidu’s Mp3 search users may have already begun to notice that searches for certain songs in the catalogs of major record labels Universal, Sony and Warner are turning up files marked as zheng ban, or “licensed copy, which can be downloaded for free. Thanks to the deal, Baidu users will eventually enjoy free access to more than 500,000 songs owned by the three labels with tracks uploaded in batches according to what’s most popular, according to Baidu’s Music and Entertainment General Manager Catherine Leung, formerly an executive at Universal Music.

How this will effect, if at all, other popular social media sites with an integrated music platform, such as Douban, Ren Ren, and so on, is not clear yet.

In the bigger picture, however, events like this lead one to believe that the force of law in China is evolving.  Particularly, intellectual property rights, which have remained arguably nothing more than empty rhetoric.  In late March this year, Baidu announced it had deleted 2.8 million written works from its online library service, Wenku, in an effort to appease Chinese authors who demanded compensation, arguing that the company allowed pirated content on the site’s servers for free download. The move came days after China’s National Copyright Administration stated that it was investigating the company for copyright infringement of books. [7]

A few days later, Baidu said it would pay a fee to songwriters belonging to the Music Copyright Society of China, the country’s official performing rights organization, each time one of their songs was downloaded or streamed through Baidu. Last year the organization won a rare lawsuit against Baidu over the company’s providing unauthorized lyrics to 50 songs on its servers. [8] To many who are interested and involved, these are all signs of positive change in an otherwise disorienting area of copyright law in China.

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[1] http://ir.baidu.com/phoenix.zhtml?c=188488&p=irol-homeprofile

[2]http://www.pcworld.com/businesscenter/article/226507/chinas_baidu_revenue_profits_up_on_strong_traffic_growth.html

[3] id. footnote 1

[4] http://beijingdaze.com/tunes/2011/07/19/baidu-ting-underwhelming-but-welcome-addition-much-room-for-improvements/

[5] New York Times, “China’s Biggest Search Engine, Known for Illegal Downloads, Makes Music Deal.” (July, 19 2011)

[6] id. Footnote 4

[7] id. Footnote 5

[8] supra 6