Baidu strikes deal to pay record companies for music

China's leading search engine Baidu will now pay three major record companies for music downloads on its site, after years of facing criticism for hosting links to pirated songs.

Baidu announced on Tuesday that it had signed an agreement with One-Stop China, a joint venture which Universal Music, Warner Music and Sony Music are shareholders of. Under the agreement, the three major record companies will license their Chinese and International music catalogues to be streamed or downloaded from Baidu.

In exchange, Baidu will pay the record companies on a "per-play and per-download basis" for each licensed song accessed on the company's MP3 search site, and on its new ting! platform, which offers free legal music downloads.

Baidu, which is China's most popular search engine, grew to dominate the market partly because of its MP3 search, according to analysts. But the service has long been accused of providing links to free pirated songs hosting on third-party sites. Music groups have filed lawsuits against Baidu in response, and a U.S. government report has even named the company a "notorious market" as a result.

In a statement, Baidu characterized the agreement as "an exciting new beginning." In April, Baidu also announced it would start paying an agency representing songwriters for every music download on the site.

By signing the agreement, the three record companies also agreed to end litigation against Baidu.

The three record companies are providing more than 500,000 tracks to Baidu, with the number of songs to increase over time, said Baidu spokesman Kaiser Kuo. All the songs are free to download and stream. But only users within China will be able to access them.

Baidu declined to comment on how much the company will pay the three record companies for each song accessed. But the company plans to offer a premium music service that is fee-based by the end of the year.

Baidu has already been working with record labels to reorganize the company's MP3 search service. Links to unlicensed downloads of songs Baidu can legally provide are being removed from the MP3 search service. The MP3 search service, however, will still provide download links to third-party sites when the search criteria is more vague or are for artists outside of Baidu's licensed music catalogs.

The joint venture One-Stop China spent nine months working with Baidu to create the deal, said Andrew Chan, One-Stop China's chief representative. To reach the agreement, Baidu had to create its legal music platform ting!. At the same time, the search giant had to remove links to illegal music downloads on its MP3 search service, Chan said.

China is infamous as a hotbed for counterfeit and pirated goods. But One-Stop China was formed in 2009 to find ways for recording companies to generate revenues in China, as well as provide channels to license music to interested parties in the country.

"With the Baidu case, we are so happy and excited," he added. "China is going through change."