Fascinating moves are afoot in the Chinese digital music market today, with the announcement that Baidu Music is merging with label group Taihe Entertainment Group – while also claiming that its music-search service has 150 million monthly active users.

“The merger represents a breakthrough in the digital music industry – the first-ever full integration of a leading Internet platform and a traditional music company,” claimed the press release. The closest example in the western world would be WMG owner Access Industries’ stake in Deezer, although that’s certainly not a “full integration”.

Baidu Music’s roots were in an unlicensed music-search service that landed its parent company in court several times with music rightsholders in the early months of 2010. In July 2011, Baidu inked licensing deals with labels for a licensed downloads and streaming service, putting an end to their litigation as part of the process.

Taihe Entertainment Group, meanwhile, has combined two of China’s biggest pop labels: Taihe Rye Music (TR Music) and Ocean Butterflies.

“As the intellectual property regime continues to improve in China and users are increasingly willing to pay for online content, prospects for the Chinese digital music industry look increasingly bright,” claimed Baidu’s release.

“The fusion of Baidu Music and Taihe will release tremendous energy from both sides and will power the music business through its next stages of development.”

However, local sources suggest the merger is as much about Baidu trying to compete with the exclusive music deals being struck with other labels by rivals including CMC, Tencent and Alibaba – its key competition rather than Apple Music, which only launched in China this September.

“This deal is more like Baidu unloading the service onto the Taihe group,” one expert told Music Ally, although another source suggested that the deal will enable Baidu to “point its own missiles back at the big three” for content licensing.

Even so, the combination of a digital service and two “pop powerhouses” in the still-nascent Chinese legal streaming market will be worth watching.

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