Baidu Creating A New Music Company: Here's What You Should Know

• Baidu Inc (ADR) BIDU recently announced that Baidu Music would be merging with Taihe Entertainment Group to create a new company.
• In a report issued Friday, Deutsche Bank analyst Alan Hellawell III took a look into initiative, and Baidu’s general tendency to opening assets to investment.
• The analyst reiterated a Hold rating and $189 price target on the Chinese Internet giant.

Baidu Music and Taihe Entertainment Group will be merging soon. However, the Baidu Music brand (one of the most popular in the world with 150 million monthly active users) and services will not be changed. Instead, the service will now include Taihe's library of more than 700,000 copyrighted recordings, and enjoy of its hundreds of deals with local labels.

"Given the recent release of increasingly strict copyright regulations in China, online music providers are working aggressively to enrich the music copyrights of their platforms," the analysts explained. For instance, Ali Music recently signed an exclusive partnership with BMG and, earlier this year, QQ Music also inked exclusive partnerships with Sony, Warner and other music providers.

Assets Open To Investment

Hellawell noted that the Baidu Music merger can be contextualized in a broader trend seen in Baidu of welcoming "financial and strategic investors to partner with it by taking part in the company's 'exciting ventures.'"

Some other recent initiatives open to external investment include: 1) the Baidu Takeout Delivery initiative, which raised $250 million from external investors; 2) "the carve-out of 91 Desktop;" 3) "the spin-off of Zuoyebang and introduction external investment from Sequoia Capital China and China Venture;" and 4) the "aircraft carrier plan" revealed by CEO Robin Li in August.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.