Baidu has often been accused of not doing enough to protect copyrights and intellectual property
Baidu signed an agreement with a joint venture owned by Universal Music, Warner Music and Sony Music to distribute music through its mp3 search service.
Baidu, China's biggest search engine, will pay the owners of the music rights on a per-play and per-download basis.
China is the world's biggest internet market with close to 470 million users.
Baidu has been involved in legal tussle with the music labels. It has been accused of steering consumers to third-party websites where pirated material is hosted.
However, the company said that all outstanding litigation between the parties involved had ended as part of the deal.
Win-win situation?
Baidu has a near-75% share of China's search engine market.
Analysts said the deal was likely to help the company
strengthen its position even further, as the Chinese internet market
grew and more users were added, "It [the deal] will be very positive for Baidu in terms of user experience and it also fits in with Baidu's box computing strategy, which is to make a lot of information available on the Baidu site," said Dick Wei of JP Morgan.
While the deal sees the end of a long legal tussle for Baidu, it also opens up extra revenue streams for music companies who have often complained of seeing their profits hit by piracy.
"Baidu, the Chinese music fans, recording artists and the record companies will all benefit from this win-win partnership," said Jennifer Li, chief financial officer of Baidu.
However, some analysts warned that although the deal was a step in the right direction, it may increase Baidu's cost of operations in the short term.
"I think there will be a higher cost involved and I am not very sure they can generate the revenue," said Wallace Cheung of Credit Suisse.
Baidu said it was in the process of uploading the music catalogues onto its servers.
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