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Thursday, February 7, 2008

Baidu, Sohu Served With New Suits By Music Companies

Baidu, the king of China’s fast-growing Internet universe, may be facing its toughest challenge yet following a fresh lawsuit, filed in a Beijing court early this week by the world’s three biggest record companies, Sony BMG Music, Warner Music and Universal Music. The trio are attempting to stop rampant music piracy.

The three record companies are asking the court to order Baidu to remove all links on its music delivery service to copyright-infringing tracks to which they own the rights.

Baidu (nasdaq: BIDU - news - people ), whose shares are listed on Nasdaq, plummeted by as much as 9.27%, to $230, on Wednesday, marking the steepest fall amid a general decline for the day among Chinese Internet stocks listed in the United States.

Separately, Sony (nyse: SNE - news - people ) BMG, Warner Music and EMI (other-otc: EMIPY - news - people ) Music’s China affiliate, Gold Label Records, plan to take joint legal action along similar lines against popular Chinese Internet portal Sohu (nasdaq: SOHU - news - people ), which is also listed on Nasdaq, and its affiliate Sogou, a proprietary search engine, after the Chinese New Year holidays, which end on Sunday. The aim is, again, to stop the portal’s search engine from offering links to thousands of Web sites that provide unlicensed access to music downloads.

Sohu is the official sponsor of Internet content service for the upcoming Beijing Olympic Games, gaining the exclusive contract to build and host the summer Games’ official Web site. Its shares were hammered as well, dropping by 6.46% to close at $43.30 on Wednesday.

Another company, Yahoo! (nasdaq: YHOO - news - people ) China, which is operated by Alibaba (other-otc: ALBCF - news - people ), is also being served with a fresh lawsuit at the behest of the record companies' trade group, the International Federation of Phonographic Industries, for its refusal to comply with a landmark ruling in December in a higher court in Beijing, convicting it for mass copyright infringement violation against Chinese law.

None of these Chinese companies have yet responded to the new suits. The record giants were encouraged by the IFPI's December legal victory in Beijing against Yahoo! China, but they continue to be frustrated by the difficulty of making the ruling effectual in a country where law enforcement is notoriously fragile.

But the December ruling may be a harbinger of things to come. If reaffirmed, it will have broad ramifications for China’s Internet companies, Baidu above all, which have drawn heavy traffic by offering Internet users free but illegal music downloads. So popular are the music services that Google, which has been slow in catching up with Baidu in China, was reported this week in The Wall Street Journal to be in the late planning stages of a joint venture with a Chinese online music company that would permit it to provide free but licensed music downloads in China.

According to the IFPI, China has "potentially the largest online music-buying public in the world, with as many broadband connections as the United States," and the trade group reckons the market overwhelmingly consists of pirated music; around 99% of potential sales are circumvented through illegal downloading. At an aggregate size of a mere $76 million, China’s legitimate music market accounts for less than 1% of global recorded music sales, it said.

John Kennedy, chairman and chief executive of IFPI, said: "The music industry in China wants partnership with the technology companies--but you cannot build [a] partnership on the basis of systemic theft of copyrighted music and that is why we have been forced to take further actions."


Google Set To Bring Free Music To China

Beijing (dbTechno) - Google may not be in the best of graces in China, but that is not stopping them from forming a joint venture with Chinese online music company, to bring licensed music downloads to China.

Google is heading to China to bring their free digital music market.

Google is going to sell free, licensed music downloads to people in China.

They have apparently already worked out a deal to do this with Universal, and are now in talks with Sony, and EMI.

The company has stated that every single music download will have a watermark on it so that they can trace where it goes on the web. They will also be high-quality audio files.

Google is making the move to compete with Baidu, which is popular for music searches and is still the top dog in China.

Google To Offer Free Music Downloads For Chinese UsersGoogle Inc., world’s number one Internet search engine, is targeting one of the largest online markets in the world, China, to offer free digital music downloads via the Web, the Wall Street Journal reported on Wednesday. So far, there has been one official confirmation from Universal Music, but other major labels such as EMI Group Ltd. and Sony BMG Music Entertainment are said to be in talks for the new services as well, sources familiar with the matter have said.

The Chinese music market has less of a legal side to it, while its piracy phenomenon is far more widespread than in North America and Europe. Google’s latest experiment could prove to be a lucrative deal, if the company will be able to reach an agreement with the major music labels. At the same time, Google will have to face Baidu, the number 1 Chinese search engine, currently dominating the market in the country.

“We were late entering the China market, and we’re catching up,” Google Chief Executive Eric Schmidt said last April, as the WSJ reported. “Our investment is working and we will eventually be the leader.” has been struggling with numerous searches for unauthorized music downloads, which has raised concerns from the music companies trying to protect their interests. Google is currently working on making quite an entrance on the Chinese online music market, with offering a free download music service.

The difference between Google’s efforts and what other competitors like Baidu Inc. and Sina Corp have to offer is that both Chinese companies have streaming music on their web sites, but they’re not downloadable. Google wants to turn that to its favor and start the new service within the next weeks. Since its debut on the Chinese market, Google came to a 26 percent market share and it’s growing stronger every year.

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