Music Industry Targets Chinese Search Engine's Advertisers

It could be a landmark in China’s protection of music copyright: the music industry is sueing Baidu, China’s leading search engine by traffic, because it claims, much of the company’s wealth is down to its illegal downloads to users by deep linking or reorganizing song data into play lists in order to draw users.

In a case taken by major labels Universal, Warner and Sony – though not EMI, which has a contract to supply music to Baidu – are seeking US$9 million in damages in the case, which was filed with the Beijing No. 1 Intermediate People’s Court. Outside the courtroom smaller music firms and bodies like the Music Copyright Society of China (MCSC), the International Federation of the Phonographic Industry (IFPI) are seeking other ways to hurt Baidu into action. Companies like R2G the court case is simply a test run: if found guilty Baidu is likely to be fined a small amount (Chinese courts limit the awards to RMB200,000 (EUR20,000 euros). But a guilty verdict could open Baidu up to a slew of further cases, in Chinese as well as foreign courts. The company’s US investors will surely be worried.   

I’ve been talking with Matthew Daniel, vice president of R2G, a local firm selling rights to international music catalogues in China, talks about wanting the big corporations and especially advertising companies involved. A well informed veteran of the local music industry, he sees the best chance for success in a multi-pronged offensive. Aside from tackling Baidu in court the music industry will also target its advertisers. By contacting its advertisers individually as well as bringing the company to court, it presents Baidu with a nightmare scenario of losing the case and its credibility with major corporate brands whose advertising spend has helped make Baidu one of China’s most wealthy and recognizable corporate names. Baidu has portrayed itself as a Chinese David against the Goliaths of the multinational music majors. Hardly the case, but it's a tactic that has some currency in ultra-nationalistic China.

Most encouraginly though, Baidu's hand may be forced by local Chinese record firms, whom bodies like the IFPI have been busily signing up as members. In the letters sent to advertisers Qu Jingming, vice president of the Music Copyright Society of China, pointedly asks advertisers “do you want to be associated with pirated music?" Qu's organisation represents 80 percent market share in China out of its well located and appointed office in Jingfang Plaza. The willingness to invite international press (though at short notice) to a recent press conference suggests a new intent to protect local music industry among state-sponsored bodies like the MCSC.

Protecting digital content is ever more important for the music industry. Global music sales took another tumble last year according to the IFPI, which represents the recording industry. A 34% increase in music sold online did little to compensate for the 13% drop in sales of CDs and music DVDs, which account for the bulk of the market. A report from PricewaterhouseCoopers forecast that spending on all forms of recorded music will continue to decline as youngsters turn to other outlets.

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