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WSJ Article w/ Jun's Quote - China's Netease Halts Music Searches

August 17, 2005 ; Page B8


Chinese Internet portal Netease.com Inc. suspended its online music-search service because of concerns about violating copyrights amid a battle by music labels to combat rampant piracy of their songs in China .

According to music-industry executives, MP3 search services offered by Chinese portals and search sites allow users to link to other Web sites and download songs, cellphone ring tones and other unlicensed music content free. China this spring passed a law that imposes fines on Web sites that
knowingly offer content illegally. Some music companies have started to use this law to begin to fight copyright violations.

Universal Music Publishing -- part of Universal Music Group, which is owned by Vivendi Universal -- Bertlesmann AG and numerous leading domestic music labels have partnered with R 2G , a Beijing company that focuses on managing and distributing digital rights of content providers, to identify illegal content providers and reach agreements with them to delink and properly license the use of their libraries of songs. R 2G says it has reached agreements with more than two dozen Internet-service providers.

Netease, which trades on the Nasdaq Stock Market, said in a news release that it decided to stop its MP3 service on Monday because most of the songs and music on the Internet lack copyright protection. The Financial Times reported the move on its Web site yesterday.

The company said that while its MP3 search engine doesn't have any direct relationship with music copyrights, it aided the behavior of violators to some extent. "We hope that young users would avoid developing habits of using an MP3 search engine to acquire property without paying for it,"
Netease said, adding that it wants to set a good example for the industry.

It said it will reopen the service when the interests of music owners and musicians can be assured proper protection.

Other Chinese Internet-services providers have started to take similar measures after beinginformed that they are illegally providing content. Baidu.com Inc., a big Internet-search company, delinked from about 3,000 songs, ringtones and other unlicensed content shortly before its recent listingonNasdaq. Still, music industry executives say there is a long way to go still.

Jun Wu, chief executive of R 2G , said: "This is a very, very encouraging move by Netease, and it's very symbolic for all of the search engines. People are starting to take [intellectual-property-rights] protection very seriously." He said R 2G is working with Baidu to resolve intellectual-property-rights

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