I've been interested to watch some of the recent moves being made by Baidu, China's leading search engine. Baidu has already distinguished itself by trouncing Google in the China market in terms of share of searches made, and in building loyalty among Chinese users. In the past year or so it has also eased into various other areas, including a localized and somewhat controversial knockoff of Wikipedia, blogs, online video and a host of other content. Now, with a new deal with EMI and a license to gather and report its own news, Baidu is stepping deeper into the media waters.

In fact, like Google and Yahoo, Baidu is already really a media company in all but name. Like those other companies, its revenue is derived mainly from packaging ads along with content that people want. But the new deals move it much more into traditional media territory.

The deal with EMI is interesting because Baidu has historically had poisonous relationships with record labels, thanks to its offering of "deep links"--search returns that link directly to pirate music song files hosted on other servers. "MP3" is one of the highlighted search options on Baidu's home page, and by some accounts, MP3 searches were what propelled Baidu's share of Chinese searches so high.

Several foreign record labels sued Baidu in China and, relatively predictably, lost. EMI was one of the plaintiffs in that suit. It seems there are no hard feelings.

Whether the EMI deal will amount to anything remains to be seen. It enables Baidu to provide streaming access to EMI's Chinese catalog (sorry, Robbie Williams fans). The service will be ad supported. But the thing about those deep links is that they lead you to files you can download onto your MP3 player and take anywhere. Streaming music is anchored to the computer, and not very mobile. It's all well and good if you're sitting in a coffee shop with a hotspot, but not so good if you want to listen on the subway. People like portable music and streaming services elsewhere around the world have failed to gain much traction.

Still, EMI is struggling globally and it isn't as strong in digital music sales as some of its competitors. It probably doesn't have much to lose and should be applauded for looking for more creative solutions than lawsuits. The streaming service might not soar, though compromises like this might be a hint of the future of music distribution in China.

But only a hint. In fact, I have to wonder if a service like EMI and Baidu are planning isn't a trial run for a near-future when smarter mobile phones are the norm in China. The mobile phone is the default, portable information device in China, with four times the penetration of the Internet and rising fast. Midrange phones do a great job with music these days. It's not hard to imagine a future of 2.5G phones (or even 3G ones if the Ministry of Information Industry ever gets around to issuing licenses) that can pull streaming music services from the network in return for a small premium on your bill.

Unlike in the US, the iPod does not dominate the Chinese portable music scene. There is room for other players and other business models here. Perhaps EMI should have signed its deal with China Mobile. Or maybe that's coming later.

The news reporting license is also interesting. In China, Web sites are generally not allowed to gather and report their own news. Big portals like Sina have licenses, but most Chinese portals and search sites have to republish news from approved sources. This is one reason stories tend to be reprinted endlessly across the Chinese Internet, a syndrome that has caused headaches for more than one multinational corporation in China.

Baidu can now create its own newsroom and hire its own journalists. What it'll do with this new power remains to be seen. But some analysts think it's a clear shot across Google's bow. My CNET Asia blogging colleague Doug Crets is quoted in the South China Morning Post story linked to in the second paragraph, above (via Asia Media):

"This is definitely competition for Google," said Crets, a researcher at Media Partners Asia.

"In most of these online sites, we're going to see an increasing amount of content and content is going to drive revenue or consumership of those sites."

That's true. Google probably won't apply for a newsroom license and, as a foreign company, probably wouldn't get one if it did apply. One of the reasons Baidu has stayed in front of Google in China is its keener grasp of what many Chinese Internet users are looking for (even if that sometimes leads in dubious directions as far as record companies are concerned). It's not hard to see a newsroom fitting into that differentiation somehow.

The one thing Baidu seems to have resisted so far is a user-created video-sharing site along the lines of YouTube. Baidu Video is much more oriented toward commercial material. One wonders why it has stayed clear of one aspect of media that, by one recent count I've seen, up to 200 other Chinese Internet companies have piled into.

Of course, that question may have just answered itself.

Related:
Baiduer's collection of Baidu homepages over the last six years. It didn't always look like Google. (In Chinese--"Baiduer" is not a typo.)

Danwei's list of Chinese video-sharing sites.

JLM Pacific Epoch's always readable Sage Brennan on the Baidu-EMI deal. On an unrelated but interesting note, see also Sage's new column on the imminent arrival of MySpace in China.

Danwei's Robert Ness presents a China Businesscast interview with Jim McGregor, author of the great China business bookOne Billion Customers, including a look at the failure of foreign Internet companies in China.

David Wolf at Silicon Hutong is not impressed with Sergey Brin's Davos confessional on operating in China.