Chinese search engine, Baidu Inc., has signed a digital music distribution deal with One-Stop China, a joint venture by the Universal Music Group, Warner Music Group, and Sony BMG.
This partnership brings the long-standing litigation between the three record companies and Baidu over illegal streaming and downloading of content to an end.
The conciliation agreement was endorsed by the Beijing High People's Court.
One-Stop China will have license over 500,000 songs owned by the three music companies which will be available for free streaming and download on the website's MP3 page and social music platform, Ting. As many as 10 percent of the songs will be in Mandarin and Cantonese. The deal is for a period of 2 years.
Baidu will have to pay a certain fee on a per-day and per-download basis. Both sides refused to divulge any further financial details. With Baidu, agreeing to bear the financial cost, music will continue to be free online but this time, legally.
China has around 450 million users of the web and is a haven for pirated content. Baidu is considered one of the chief conduits of these pirated downloads. Internet piracy of music is estimated to be around 99 percent in China. According to Michael Schlesinger of International Intellectual Property Alliance, the value of total legitimate digital sales in 2009 in China was $94 million, and total revenue (both physical and digital) was a mere $124 million. In the US it is worth $7.9 billion.
 We've never wanted to stand there and thumb our noses at the recording industry, Kaiser Kuo, Baidu's director of international communications, told New York Times. This is a watershed moment. It's a great way for us to deliver the best possible user experience by providing free and high-quality music and brings obvious tangible benefits to all parties involved, including the labels, artists and advertisers, he added.
Observers see this as a shift in strategy on Baidu's part. Although they have 84 percent share of the Chinese Internet search market, according to iReseaerch, a Shanghai-based research firm, Baidu cannot ignore the other players in the market, especially Google.
Google has more than a million songs available for free download and streaming. Since March, it is directing all traffic from China to its Hong Kong server.
Baidu has also deleted pirated written works of Chinese authors from its online library. Recently, the company also agreed to pay a fee to songwriters belonging to the Music Copyright Society of China each time one of their songs was played or downloaded, according to the New York Times.
Diversification and Restructuring
Baidu recently announced the departure of Shen Haoyu, Senior Vice President, Business Operations. The company also revealed that it will restructure and realign the business into four major departments, i.e., sales, products and technology, commercial technology, and operations.
In a bid to diversify its business, the company recently entered into an agreement with Huashu Media to develop digital products and business models for Chinese television users.
This agreement will extend Baidu's search, video, music, and communication streams to more than 100 cities, potentially reaching tens of millions of television users. Baidu already has a stake in the online video company Qiyi.com.
Baidu paid $306 million to become majority shareholder in Qunar, China's leading travel website. The deal was signed in June.
The company also has a tie-up with Microsoft which will allow Bing (Microsoft's search engine) power its English keyword searches.
The tie-up will allow Microsoft access to the 450 million web users of China. Bing, which censors its content in China, has a negligible presence in the country compared to the nearly 80 percent that Baidu has. It is believed that Google has nearly 20 per cent share.
Baidu has also shown interest in being a part of Shanghai's International Board when it is launched. The board will allow foreign firms to sell yuan-denominated shares for the first time. The finer details have yet to be chalked out. Multinationals such as HSBC, Unilever, and Standard Chartered Plc have said they want to list on the Shanghai Stock Exchange when rules allow.
The various agreements and business restructuring within Baidu will see the company moving toward a more robust future and brand presence which till date was mostly associated with content piracy.