Source: MySpace to announce new music service on Thursday

A new music service jointly owned by News Corp.'s MySpace.com and three record labels will be announced Thursday, according to a source familiar with the deal.

MySpace Music has been expected for weeks and will offer streaming music, downloads of unprotected MP3s, concert tickets, ringtones, and other merchandise, the source told CNET News.com. The source added that MySpace is hopeful the service will open in the next few months.

The deal immediately catapults News Corp. Chairman Rupert Murdoch into competition with Apple CEO Steve Jobs' iTunes, which offers music and video downloads. Backers are hoping MySpace Music can compete against iTunes by providing MySpace's 110 million worldwide monthly visitors a sweeping range of music services and products that eclipse iTunes' offering.

(Credit: MySpace.com)

It's been well-reported that label honchos think Jobs and his ubiquitous iPod have amassed too much control. MySpace Music is apparently part of a strategy by the big music companies to find an iTunes competitor, even if they have to help create one.

The music service enables MySpace to leap past competitors Imeem and Last.fm, which beat MySpace to the punch when they began providing free, streaming music to users. But now, MySpace can present everything those services do and much more. Facebook was reportedly also in talks with the major record labels, but the music industry source said that unless something dramatic happens, Facebook is months away from being where MySpace is now.

MySpace Music will launch with songs from three of the top four record labels: Universal Music Group, Warner Music Group, and Sony BMG Music Entertainment. The only label that hasn't agreed to the deal is EMI Music Group, said the source, who added that MySpace and EMI executives are working around the clock to close the deal and everyone involved is confident that EMI will eventually be part of the service.

All the labels will receive a minority share in the company and a share of all the revenue generated from the site, according to the source, who spoke on condition on anonymity.

Universal Music Group was thought to be holding up the service because of a copyright-infringement lawsuit that it filed against MySpace last year. MySpace has agreed to pay a "huge" settlement, according to Peter Kafka at Silicon Alley Insider.