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China Grapples with Digital Piracy, Changes Emerge

6 August  Digital Music News  Story by news analyst Michael Bloom

China is learning to cope with the choppy seas of rights management and digital piracy. The experience of two Chinese companies illustrates the fluidity of the market, with smooth sailing for some and rough waters for others. Baidu.com recently agreed to remove pirated links, under pressure ahead of an expected IPO. But pre-sale documents show that Baidu is still feeling the sting from two lawsuits, both filed in June 2005. Beijing New Picture Film Company, who holds the rights to the film House of Flying Daggers, sued Baidu for allowing users to download the movie for a fee. The group alleges that the use was unsanctioned and no royalties were paid to the film company. Additionally, Shanghai Busheng Music Culture Media Company sued Baidu for multiple unauthorized downloads of 53 of its songs. Unresolved issues like these could cause investors to shy away, potentially taking some of the air out of Baidu's offering.

In a strikingly different example, Tom Online, which calls itself a "mobile internet company," is busy promoting copyrighted wireless and online music in China . The company announced a six city tour featuring a "new breed" of singers, all introduced via the internet. Tom Online CEO Wang Lei Lei hailed the integration of wireless and internet technologies, a convergence area that he feels Chinese ISPs can play a key role in. "Tom Online is taking the lead in driving the importance of service providers in the new value chain of China 's music industry," Wang said. The mobile music roadshow kicks off in Chendu on August 6th, stopping in Guangzhou , Nanjing , Zhengzhou , Xian and ending in Dalian .

Do the experiences and approaches of these two companies represent a shift in the intellectual property landscape? China , until recently, really didn't recognize individual property rights, much less intellectual property. But Western nations have been pressuring China to crack down on piracy, precipitating more stringent laws and policing. Now, the attacks on Baidu are coming from within, signifying a shift in a marketplace that has previously been wide open. Chinese copyright management firm R 2G , which originally brought the heat on Baidu, has recently sued two other Chinese portals (9sky.com and 21cn.com) for copyright infringement. Meanwhile, Tom Online is smartly using the new dynamic to position itself as a supporter and provider of copyright protected digital music. Time will tell if that becomes a larger trend, though some previously unthinkable changes have already happened.

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