The service, which Microsoft aims to have ready by the end of July, will offer users the chance to stream music for free and also download to own.
It will be a similar principle to Spotify but we are still examining how the business model will work.
Spotify users can stream music for free in exchange for listening to around a minute of advertising every half hour but for £9.99 a month, the ads will be turned off. It is thought Microsoft’s offering will be ad-supported too as well as having a paid-for premium service.
The service would be operated and owned by Microsoft, while being promoted through MSN and other parts of the Microsoft network. The addition of a Microsoft-owned music streaming service would tie in with an increasingly consumer focussed strategy from company to make its Xbox 360 console the main “entertainment hub” in the family home. Users are already able to download movies through their console and play games against one another online.
The service is expected to bolster the appeal of Zune, Microsoft’s music player. No download partner has been signed yet but Microsoft is in discussions with several companies. Spotify’s download partner is 7digital and is in the process of offering one-click to own functionality.