You can turn an adversarial pirate into a mercenary. Helping shake its reputation as a haven for illegal song downloads, Baidu.com (NASDAQ:BIDU) is teaming up with Taiwan's Rock Music Group for an ad-supported music-streaming service.
It's not the first time that Rock Music Group, the world's largest Chinese-language indie music label, has teamed up with a dot-com heavy in China. It was part of a consortium of labels that hooked up with SINA (NASDAQ:SINA) back in March to cash in on downloads and ringtone sales.
Baidu hasn't turned a deaf ear to the music world, either. The Chinese search engine leader partnered with Viacom's (NYSE:VIA) MTV last year in a music-video streaming deal.
Sure, Baidu's still a popular hub for MP3 file searches. However, according to Alexa.com, just 11% of the website's traffic is coming from its mp3.baidu.com music search pages. It commanded a 15% slice of the website's traffic last fall.
So maybe this isn't the same kind of radical transformation as the one we witnessed stateside with Napster (NASDAQ:NAPS). The poster child for peer-to-peer file swapping went through various corporate incarnations before being reborn as a legal music subscription service. However, when a Chinese music giant like Rock Music Group plays nice with China's most popular website, it's an encouraging sign.
Providing tunes for free and hoping that sharing in the ad revenue will help offset any actual sales is not an easy call to make. It takes gumption to realize that there may be other benefits to an ad-supported streaming model, such as new artist exposure and incremental revenue streams.
For an online market that is still so early in its infancy, it's making surprisingly smarter moves than we are closer to home in burying Internet radio and suing music fans.
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Baidu shares have more than doubled since being recommended in the Rule Breakers growth-stock newsletter service. SINA is a Motley Fool Stock Advisor recommendation. Tune in for yourself with a free 30-day trial subscription to either service.
Longtime Fool contributor Rick Munarriz has been to mainland China just once, but he's longing to brush up on Mandarin and give it another go in the future. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
