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January 16, 2007 8:12 pm

EMI pulls out of piracy suit against Baidu

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EMI has pulled out of the recording industry’s anti-piracy lawsuit against Chinese internet search company Baidu.com, with the two companies agreeing instead to co-operate on an advertising-supported online music service.

The decision by the UK-listed record group, which this week announced a drastic restructuring, could complicate the International Federation of the Phonographic Industry’s legal action against Baidu over the Nasdaq-listed group’s popular online music search service.

The IFPI suit, backed by Sony BMG, Warner Music and Universal Music, accused Baidu of supporting piracy by making it easy for fans to find and download unlicensed tracks. A Beijing court ruled in Baidu’s favour in November but the IFPI has vowed to appeal.

“We will now be withdrawing from the appeal process,” Amanda Conroy, an EMI spokeswoman, said Tuesday. Instead, EMI and Baidu will share revenues from an advertising-supported free online music streaming service in China. Ms Conroy said the agreement would give Chinese fans legal access to EMI’s Chinese catalogue but would not stop Baidu’s search service from helping users to find and download pirated EMI tracks.

“We still don’t accept that the practice of [such] deep linking is legal in China or anywhere else for that matter,” she said. “But it is crucial that we work to develop the legal music market.”

John Kennedy, chairman of the IFPI, said EMI’s decision would not derail its appeal. “We all want to be in business with Baidu but on a holistic, legal approach,” he said.

The IFPI is also preparing for Baidu’s planned launch this year in Japan, he said, but it would “ask Baidu for assurances” about its behaviour before taking any legal action in Japan.

Under its new link, Baidu will set up an EMI Music zone on its website to offer all of EMI Music’s Chinese repertoire, including artists from Singapore, Taiwan and Hong Kong. EMI estimates more than 90 per cent of music searches in China are for local artists.

Users will not be able to download the music but EMI and Baidu will “explore developing advertising-supported music download services”, the companies said.

For Baidu, the deal marks a further step in its efforts to leverage the popularity of its music search service to position itself as a source for legitimate content.

In October, Baidu announ-ced an alliance with Viacom, the US media group, under which it offered video content from the MTV music channel.

EMI and Baidu’s decision to rely on advertising instead of subscriptions for the new service highlights the difficulty of generating significant revenue from music or video in a market where piracy is rampant.

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