China's Music-Piracy Clampdown Will Likely Affect Baidu

Sep. 04, 2009 3:21 PM ETBaidu, Inc. (BIDU)1 Comment
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By Leena Rao

Yesterday, China’s Ministry of Culture (MoC) warned that it would strengthen checks and policing of online music content. The MoC said that search engines, which have been a source of pirated music in China, can only provide search information for tracks from legitimate music companies. This move may pose as a serious problem for China’s most popular search engine Baidu, which has long faced legal issues surrounding its index of pirated music.

According to the report, the MoC is requiring that companies providing online music streams or downloads gain approval as “Internet culture companies,” and only companies that have directly obtained broadcasting or licensing rights can apply for approval. Imported music that is already broadcast online in China but has not been approved must be submitted to the MoC before December 31, 2009.

The impact this will have on Baidu (NASDAQ:BIDU) is noted by Pali Research’s analyst Tian Hou, who estimates that as much as 80 percent of Baidu’s traffic is from music search. Hou says that with respect to music search results, most of the links provided are posted by illegitimate music companies. If these links are cut off, says Hou, traffic to Baidu could decrease.

According to comScore, Baidu had 145 million unique visitors in July of 2009 worldwide (with more than 95 percent of those coming from Asia), while its MP3 search engine attracted 47 million uniques, which is only 32 percent but still significant. For July, Baidu was ranking fifth amongst most visited search engines worldwide, behind Google, Yahoo, Bing and

The success of Baidu has been credited to its index of music which is available from its front page, something Google caught onto last year when it entered a joint venture with to offer free and legal music in China. Baidu’s

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