WSJ: Google close to online music deal in China

Although the report does not specify a specific partner, it is being viewed as an important strategic move in Google's fight for market share against Baidu.

Three global music companies will be represented, as well as dozens of smaller players. Universal is said to be confirmed to join the effort, and talks are ongoing with EMI and Sony BMG. Warner is said to also be interested, but it appears that there have been no solid talks, according to sources.

The service could be announced and launched in the next several weeks, the Wall Street Journal says.

Baidu remains the leader in search within China, even though Google has been in the market since 2006. There is one major difference: Baidu's music search service links to a significant amount of unlicensed content.

It is estimated that at least 7 percent of its traffic is due to this offering. Baidu is also making money off these downloads by selling ads on those pages.

With that controversial move, Baidu has become the target of the ire of the music industry. In fact, the IFPI is still pressing ahead with its court action against the site, even though Chinese courts have found it not liable for copyright infringement.

The IFPI estimates that almost all digital music in China is pirated, and it has fingered Baidu and Yahoo China as the primary contributors to the problem.

Google's response will appease the record industry, and offer a legitimate alternative to what is currently available. It will also give the labels a way to break into a very large market which obviously, like the rest of the world, has a craving for digital music.

Files will be watermarked to track downloads, as well as give the record labels a clearer picture of what is being downloaded.