The Global Outpost

China’s Ministry of Culture has issued a new online music policy that will regulate online music content and potentially reduce the level of music piracy.

Pali Research has already warned that this policy will significantly affect search engine Baidu as they believe that 80% of Baidu’s traffic is from music search. And with a majority of links being provided by Baidu being to illegal music content, Pali researcher Tian Hou stated that,

“If Baidu has to cut off the links to illegitimate music content, than we believe traffic to its websites could decrease.”

The Ministry of Culture clearly stated that in reference to Search Engines, the provision of music links requires not only an “Online Cultural Business” license but also the approval for disseminating music products which have been audited by the Ministry of Culture and given subsequent approval.

At a press conference on 3rd Sep, a Ministry of Culture official stated,

“Baidu’s MP3 service is illegal but by the year end, all music search services will have to be legalized.”

Pali Research cited an official who gave an interview to the media clearly stating that Baidu and Sohu owned search engine Sogou can only provide search music links from legitimate music companies.

The main aspects of the new policy will be as follows:

1. Every company distributing or disseminating music – free or otherwise – will have to obtain a licence to operate as an “Online Cultural Business.”
   • Only those business entities which have gotten the exclusive license of Digital Network Dissemination Rights are qualified for online music operating activities which include online music production, release, dissemination (including the provision of links to music content products) and importing.
2. All online music disseminated must be approved by the Ministry of Culture, and in cases of B2B distribution, recipient companies will also have to be specified.
   • All existing imported online music products which are disseminated in China without the appropriate audit approvals should be submitted to the Ministry of Culture by Dec 31st, 2009.
   • Music products will be approved via the MoC’s online system in 20 days, with an option for a fast-tracked 3 day approval for urgent cases
   • Online music is defined as music products that are transmitted by information networks such as the internet, mobile communication networks, fixed communication networks via digital formats, including not only the usual definitions of music but also other forms of digital music products including music videos, Flash and others which are provided with video frames accompanied by the performance of music
3. In reference to Search Engines, the “Dissemination and Provision of Music Product links” is an online music business behavior which can only be carried out by “Online Cultural Businesses” which have been established with the approval of the Ministry of Culture and are disseminating music products which have been audited by the Ministry of Culture and given subsequent approval
4. The authorization period for the import of online music should be more than one year and on an exclusive basis in China and the contract/ agreement will be titled the Right of Digital Network Dissemination for music products.
   • This contract/ agreement can only be enforced when its contents get approved by the Ministry of Culture. Online music products from HK, Macau and Taiwan are also subject to these audit regulations.
5. The Ministry of Culture will monitor and investigate business entities which carry out illegal online music operations or provide unlicensed online music products

A full transcript of the Ministry of Culture’s policy press release can be read here

Some reports like that on Wall Street Journal focused more heavily on the typical censorship aspect but I did seek to put it in practical perspective when I was interviewed for the article,

“If you look at the cost-benefit analysis, there is a bit of time required to do this, but if the benefit is that those who are doing it the right way get to have a fair shot at the market, it’s probably worth doing.”

In summary, there will certainly be the following significant implications

• Search engines will be liable for all music links and ensure that these are legitimate links
• Companies seeking to deal in music products and services in China will have to obtain the appropriate license from the Ministry of Culture
• Foreign companies seeking to have their music distributed in China will have to appoint a distribution company on an exclusive basis for at least a year or more – and provide the music and lyrics (which has to be translated into Chinese) for submission and approval from the Ministry of Culture.
• The Ministry of Culture will monitor and investigate business entities which carry out illegal online music operations or provide unlicensed online music products.