Baidu facing the music over MP3 links
China’s ‘ Google’ connects users to pirated albums Music industry giants seeking compensation
SHANGHAI— Like thousands of tech- savvy young Chinese, Samuel Ying regularly checks in at Baidu. com to top- up his music collection from its links to more than 4 million MP3 files.
“ The site ( allows) me to choose the sort and size of the music files and the speed to download them,” said Ying, 23, a salesperson for an international consumer products company in Shanghai. ‘‘ Compared with other tools, it’s got more options.’’ The MP3 search page’s popularity has helped make Baidu China’s biggest search engine, accounting for nearly half of all queries. It leaves domestic and international competitors such as Google Inc., which last year bought 2.6 per cent of Baidu, in the dust.
There’s a problem, though. Many, probably most, of those MP3 links connect to pirated copies of copyrighted music and the music companies aren’t happy that something so successful is helping rip off their songs.
Last month, a Beijing court ordered Baidu to block links to pirated copies of songs copyrighted by record company Shanghai Push and compensate it 68,000 yuan ( about $ 10,000).
Baidu is appealing, but it’s already being pursued by four other music industry giants and their local subsidiaries over near identical claims. Universal, EMI, Warner, Sony BMG and local subsidiaries are seeking 1.67 million yuan in compensation.
Baidu argues that it merely provides a search function, not downloading services, and therefore isn’t violating copyrights.
“ We believe that the district court order was based on a misunderstanding of the search engine technology and therefore is without merit,” Baidu’s lawyer, Li Decheng said.
That could be a hard case to make, though, following court decisions in the U. S. and elsewhere allowing lawsuits to be heard against Internet file- sharing software developers such as Grokster.
While China’s enforcement of intellectual property rights is lax — rampant CD piracy already limits artist revenues to concert and television appearances — Baidu’s U. S. stock market listing makes it vulnerable there, where enforcement is much stricter. “Baidu may have difficulty claiming to be just a neutral search site,” investment bank Piper Jaffray analysts Safa Rashtchy and Aaron Kessler said in a report last month on the company. “ We believe this to be a significant risk.’’
Still, MP3 search may be too popular and too lucrative a feature to give up without a fight.
Co-founded by current CEO Robin Yanhong Li in January 2000, Baidu has grown rapidly along with China’s Internet population, which passed the 100 million mark in August.
It now connects to more than 740 million Chinese language websites, and myriad other online media. More than 41,000 advertisers give it a steady source of revenue.
Baidu had a dazzling debut on the Nasdaq on Aug. 5, more than quadrupling on its first day of trading, but has since slipped back some. With Baidu’s popularity soaring among both Internet users and advertisers, Piper Jaffray expects revenues from sponsored search in China will reach $ 1 billion ( U. S.) annually from just $134 million now. Daily searches by Chinese Internet users are expected to jump from 360 million this year to 816 million in 2007. MP3 searches already account for a significant portion of those searches — about 20 per cent for Baidu, compared to 10 per cent for pictures and just 1 per cent for news.
Baidu’s simple, uncluttered search page, not dissimilar to Google’s, leads to pages of links to songs and videos from acts ranging from Iron Maiden to Jay- Z, as well as scores of Chineselanguage artists.
In addition to drawing hip, young users to Baidu, the MP3 listings also carry advertisements for such brands as HP and Nescafe, generating an estimated 5 per cent of Baidu’s $14.2 million in revenue last year.
While Baidu’s MP3 site occupies a “ gray area,” more such lawsuits could turn investors away, wounding the company’s already slumping stock price, said Duncan Clark, managing director of Beijing telecommunications consulting firm BDA China Ltd.
“ There’s blood in the water,” Clark said.
Baidu could simply say uncle: Netease, a competing search engine, has already dropped its links to all sites that it merely suspects of offering pirated files. But Clark said Baidu could be pushing for some other accommodation, given the popularity of MP3 search and the massive technical burden of policing its links.
Baidu and its lawyers declined to comment further on the cases. The record companies said they would withhold comment while their cases, recently consolidated into a single claim, are being heard.