Baidu announcement misleading?

April 13, 2011

The whole industry was buzzing with the announcement that Baidu will open a legitimate music service in May called Ting. Ad based, the revolutionary sounding of the news was that Baidu finally has relented to the pressure and is going to pay at least songwriters through a deal with MCSC (the Mechanical Copyright Society of China).

Thrilled, good for China, good for us, good for the business!!

One might think.

But that would be too easy, wouldn’t it? The whole thing will not make much sense.

First: Baidu relented to the judgement in a lawsuit brought onto them by MCSC. The court ordered Baidu to pay the songwriters/publishers that MCSC is representing. Which is a good portion of the worldwide music publishing market, but not all of them and some major publishers are missing from the deal.

Second: The service will be offered alongside the illegal search activity that makes Baidu the biggest enabler of music piracy in the World. Baidu reckons it will migrate 50% of search around music to the new platform. And that activity will lead to substantial traffic that in turn sponsors a lot of advertisement. The money generated from that will be paid in part to the songwriters.

Those models don’t fare well for the people who create the music. Spotify, Google Music etc are concentrating a lot of listeners, but the pay out to the people that matter, the artists, is abysmally small. Not a good thing in the long run.

And certainly not what is needed in terms of turning China into the lucrative opportunity that it can be.

This is not only clear to most Western businesses, but it begins to dawn on the Chinese Music Industry as well. They initiated the following letter that has been published in the Financial Times in March 2011:

Dear Sirs,

Censorship is not the only issue surrounding China’s internet strategy (Leader article, March 23). The continued widespread abuse of the intellectual property of Chinese and international rights owners is a dark cloud hanging over the country’s e-commerce miracle. Our organizations represent the legitimate music sector in China and internationally, comprising thousands of record labels and music publishers.  Our members want to partner with and invest in China’s digital revolution, but they cannot do so while the music service run by the dominant internet company, Baidu, facilitates infringement of the rights of artists and creators online.
The legitimate Chinese music market is a huge investment opportunity that is waiting to happen.  This is a country with twice as many internet users as the US, but where legitimate music consumption is miniscule, with digital revenues per user at less than 1% of the US equivalent.

Baidu is the biggest source of this problem, with its MP3 music search service estimated to be responsible for over 50% of infringing music distribution in China.  It has the means to bring immediate change by proactively filtering infringing works from this service. As one of China’s most successful companies with a growing profile internationally, Baidu will face increasing pressure on this issue in the coming months. This was demonstrated last month when the US Government highlighted Baidu in its list of “notorious markets”. The protests have been echoed in recent weeks by a coalition of Chinese authors and by Japanese book publishers.
Our members welcome the commitment of the Chinese government to improve enforcement of intellectual property rights.  It is now time for corporate role models like Baidu to lead this initiative from the front.

Yours sincerely

Frances Moore, CEO, IFPI

Bill Zang, Chairman, China Music Industry Committee (CMIC)

Alison Wenham, President, World Independent Network (WIN)

Ger Hatton, Secretary General, International Confederation of Music Publishers (ICMP)

We support this initiative wholeheartedly. Bill Zang is our friend and business partner. He understands perfectly well that only if copyright can be turned into money, the artist will benefit and the people will benefit from the artist in return!

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