Baidu Cranks Up Anti-Piracy Campaign

Dec.31.13 | About: Baidu, Inc. (BIDU)

Just days after announcing a new acquisition designed partly to rid its various sites of piracy, leading search engine Baidu (Nasdaq: BIDU) has removed all pirated material from one of its popular video sharing sites. The timing of this move looks quite interesting for a number of reasons, including the fact that Chinese media are saying Baidu has just been fined by Beijing for piracy violations. The move also comes just 6 weeks after Baidu was sued for piracy by China's leading video sites, which took the action in an unusual alliance with Hollywood's most powerful trade association. But perhaps most interesting is the fact that the U.S. could soon release its latest list of the world's most "notorious" piracy sites, and Baidu has no desire to see its name appear on the list.

I should start by commending Baidu for its efforts to stamp out piracy over the last few years, as it seeks to shed a legacy that included the rampant illegal trading of copyrighted material on its various sites. Its efforts were rewarded 2 years ago when its name was formally removed from the "notorious" list published by the US Trade Representative's office. But the company splashed back into the piracy headlines last month, when leading video sites including Youku Tudou (NYSE: YOKU) and Sohu (Nasdaq: SOHU) joined with the Motion Picture Association of America (MPAA) to sue Baidu for continuing to allow piracy activities on some of its sites (previous post).

Now Chinese media are reporting that Baidu has removed all pirated material from its Yingyin video-sharing site. In a message on Yingyin, Baidu says it has been transforming the site to an entertainment platform , and that it is committed to copyright protection. The latest media reports note that Baidu, in addition to being sued in November, was also recently fined 250,000 yuan ($41,000) by Beijing regulators and ordered to halt piracy on its sites.

Baidu's removal of pirated material from Yingyin comes about a year after it also started quietly clamping down on trading of pirated music on another of its popular sites. Late last week, the company also announced a deal to buy the online literature unit of game operator Perfect World (Nasdaq: PWRD) for $32 million (previous post). That deal marked the continuation of the anti-piracy campaign, since Baidu has previously been accused of allowing pirated written materials to trade on its sites.

It will be interesting to see if this latest move placates Baidu's critics, and perhaps results in the dropping of the November lawsuit. I suspect the lawsuit will proceed, since to me it appeared to carry some ulterior motivations as the Chinese plaintiffs sought to bring negative publicity not only to Baidu but also to iQyi, Baidu's popular video sharing site that is contemplating a New York IPO next year.

Baidu must also be concerned about the upcoming latest edition of the U.S. "notorious" piracy list. Washington has published the list in December in each of the last 2 years, though there is no formal timetable and no list has come out this month. But many may expect the U.S. Trade office to issue its latest list in the beginning of next year. It's also a well known fact that the MPAA, as the main spokesman for the film industry, has huge input to who gets included on the list.

Thus the fact that the MPAA is a plaintiff in the November lawsuit must certainly have Baidu scared that its name could reappear on the "notorious" list after it trumpeted its removal 2 years ago. Look for some major behind-the-scenes lobbying between Baidu and the MPAA in the next few weeks, and perhaps some more anti-piracy actions as the company tries desperately to avoid the embarrassment of reappearing on the "notorious" list.

Bottom line: Baidu's clampdown on pirated video sharing on its Yingyin site is partly in response to a recent lawsuit, but is also aimed at keeping its name from reappearing on the U.S. "notorious" piracy list.

Disclosure: No positions.