If media companies accusing China's leading search engine of making it easy for users to access pirated files sounds familiar, it's because something similar played out several years ago in music. Record labels accused Baidu and others of linking to music-piracy websites and even deep-linking to individual tracks. Baidu silenced some of the critics when it rolled out a legal music offering two years ago.
The accusations this time involve Baidu linking to unauthorized video sites as well as making pirated clips available through some of its apps. The penalties being discussed won't make a dent in the billions that Baidu has in the bank, but it will be an interesting battle because it seems as if those going after the dot-com darling may have other reasons.
Recent deals have changed the landscape of where Youku Tudou, Sohu, and Tencent stand in relation to Baidu.
Let's start with Youku Tudou, which reports quarterly results this afternoon. The merger between Youku and Tudou formed China's largest video streaming provider, but that throne is now being challenged by Baidu's recent combination of iQiyi and PPS. Anything that Youku Tudou can do take Baidu down a notch can only help its leadership position.
Sohu has been growing its fledgling video platform at a healthy clip for years, but the Baidu connection comes from Sohu operating the country's third most popular search engine in Sogou. Tencent recently took a minority stake in Sogou so both companies also have good reasons to knock Baidu's credibility.
This battle will play out over time. Is Sogou free of links to pirated-media sites? It's not as easy to scrub a search engine clean as you may think. Is Youku Tudou or Sohu's video platform free of copyright violations? We'll see if shots are fired back from those being accused.
For now, investors don't have to worry. The damages reportedly being sought out of both Baidu and another privately held video site add up to less than $50 million. Baidu closed out its latest quarter with more than $7 billion in cash and equivalents on its balance sheet. This is more about reputation than legal tabs, and it's why Baidu should -- and will -- fight this.
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