As we have reported earlier in February about the rumor that Baidu would resolve its long-time pirate mp3 issue and it also launched its new music service Baidu Ting back in May. Baidu finally revolved its dispute with the music companies, after infringing their copyrights for years with its MP3 search .

Today, the leading search engine in China signed a landmark deal for the distribution of digital music with One-Stop China (OSC), a joint venture whose shareholders are three of the leading global record companies: Universal Music, Warner Music, and Sony Music.

Baidu had been free-riding on the music companies’ intellectual properties to build its popularity among young internet users in China. In its early days, (2003-04) about 50% of Baidu’s traffic was from offering MP3, most of which with no proper copyright.  It caused the major music companies to sue Baidu in the Chinese courts in 2005 and again in 2008.  But the music companies lost their cases in both times.

However those days are gone. Now Baidu no longer worry about traffic. It is the leading search engine with has over 70% of China’s market. A recent check with Alexa showed that MP3 accounted for only about 1% of Baidu’s traffic today.  More importantly, it needs to clean up its image.  Being accused of copyright infringement is a hazard for its future development.

Investors will appreciate such move.  Its  stock price shot up almost 3% on Tuesday on Nasdaq, right after the annoucement.

Details of the Deal:

OSC shareholders will license to Baidu their catalogues and upcoming new releases, including Chinese songs (in Mandarin and Cantonese) and international tracks, which can be streamed or downloaded from Baidu’s servers.

Under the terms of the deal, Baidu will remunerate music content owners on a per-play and per-download basis for all tracks delivered through the Baidu MP3 Search service, as well as Baidu’s newly launched social music platform, ting!. The new product offers users the ability to discover and share music and music-related content.

Users will be able to sign up for membership free of charge through the advertising-supported ting! website, ting.baidu.com.