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Microsoft to launch rival to iTunes and Spotify

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Microsoft plans an expansive Xbox music service joining Spotify-style streaming with download and online-storage functions similar to Apple's iTunes, several sources with knowledge of the situation said.

The Redmond, Washington-based software maker is in talks with major record companies for the needed rights, and plans to begin service later this year, said the sources, who asked not to be identified because the discussions aren't complete.

By combining the best features of competing services, Microsoft seeks to build a digital product that lets customers consume music any way they like. The maker of the Xbox console is building the new music business after its unsuccessful effort with the Zune service, which will close and move customers to Xbox Music, the company said on its website.

Microsoft is negotiating with Vivendi's Universal Music Group, billionaire Len Blavatnik's Warner Music Group, Sony's music division, all based in New York, and Citigroup's London-based EMI, the people said.

All four music companies declined to comment in e-mails. Jose Pinero, a Microsoft spokesman, also wouldn't comment.

On June 18, the company announced plans to produce its own line of tablet computers called Surface.

Streaming service

Xbox Music seeks to offer streaming for a monthly or annual fee, similar to Spotify's subscription service, and let consumers buy digital music through an online store, such as Zune, Apple's iTunes and Amazon.com, the people said.

The company is also seeking to offer Xbox Music users an online locker accessible by multiple mobile devices running Windows 8, the people said. Users could put entire collections online, including music purchased elsewhere, for a monthly or annual fee, they said.

The talks for the Xbox service are still early and Microsoft may not be able to obtain all of the rights it's seeking, the people said. Even if successful, Microsoft may choose to roll out features over time, they said.

The Xbox music service was announced June 4 at the E3 video-game conference in Los Angeles, without details about how it will work or when it will be available.

Microsoft announced the service without having record deals completed. The company needs the four music companies onboard to avoid releasing an offering with fewer artists than the Zune service, the people said.

Bloomberg News

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