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Chinese search engine Baidu Inc. (BIDU) is launching a new business unit to provide licensed, copyrighted video content online, entering a field that is quickly becoming crowded and highly competitive in China.
Baidu envisions the site as working on a similar business model to Hulu, an advertising-supported video site in the U.S. that has licensed content from several television broadcasters, Ren Xuyang, vice president of marketing and business development at Baidu, told Dow Jones Newswires Thursday.
Hulu, which is not available in China, is jointly owned by NBC Universal, Walt Disney Co., (DIS) and News Corp.(NWS)
News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.
"As the country's leading search engine, we'd like to grow in this space to meet our users' needs. We see large volumes of our users searching for high-quality licensed videos and currently there are no video sites that can fulfill this need," Ren said.
But Baidu will be competing with many other players all eyeing the same market opportunity in China, such as online video sharing sites Youku.com and Tudou.com.
"It is kind of a difficult market. There is lots of competition from other online video providers. Users may already be used to getting video from sites like Youku, and there is competition from pirated video as well," said Elinor Leung, an analyst covering Baidu at CLSA.
Baidu's Ren said the site will be differentiated because it will be the only site in China that solely offers licensed content, as opposed to user-generated content.
Youku and Tudou started out as video sharing sites similar to Google Inc.'s (GOOG) Youtube, but have recently added more licensed content like serial dramas and entertainment shows. Last month, Youku said that around 70% of the content on its site is professionally produced and licensed from content partners.
Youtube is unavailable in China due to government Internet censorship.
Competition will also include several mature Internet portals such as Sohu.com Inc. (SOHU) and Sina Corp. (SINA), who are all seeking to carve out a niche in the online video space.
Sohu, for instance, has offered online broadcasts of U.S. National Basketball Association games since 2006.
The large user base for Baidu's search engine may give it an advantage over rivals, and its data on user searches will also give it the ability to target ads more precisely to users, JP Morgan analyst Dick Wei said in a note on Tuesday.
"I think there may be real advertising upside there, but maybe not very much in the near term," said CLSA's Leung.
-By Aaron Back, Dow Jones Newswires; (8610) 8400-7701; email@example.com