Universal Music is to go head to head with Apple Computer's popular iTunes music store in a venture that will allow consumers to download songs without charge and rely on advertising for its revenues.
The service, SpiralFrog, represents a departure from Apple's 99-cent-a-song business model. It starts operations in December.
The move by Universal, the world's largest music company, reflects music companies' willingness to experiment as they try to capture some profit from the boom in digital distribution, which is still dominated by illegal file-sharing networks.
A report released last month by the International Federation of Phonographic Industries (IFPI) revealed there were still 40 illegal downloads for every legal one.
Although Apple's iPod and its iTunes music download service dominate the market for legally downloaded music - its share is about 80 per cent - competition is expected to heat up in the run-up to Christmas. This year the IFPI has predicted that 60 million music players will be sold worldwide, many of them MP3 players not compatible with Apple's services. As well as start-ups such as SpiralFrog, established companies are getting ready to flex their muscles.
Microsoft, Apple's big rival, is preparing to launch Zune, which will offer both music players and a music download store.
MTV has launched a music service called Urge, which has downloadable music and music videos.
"Offering young consumers an easy-to-use alternative to pirated music sites will be compelling," said Robin Kent, SpiralFrog's chief executive and the former head of the Universal McCann advertising agency.
Customers will be able to download an unlimited number of Universal songs to their computer and one other device. They will not be able to transfer those songs to a compact disc and must visit the site at least once a month to maintain access.
Mr Kent has held discussions with major labels Warner, EMI and Sony-BMG and hopes they will be lured by the surge in online advertising. Merrill Lynch last week raised its forecast for the sector's growth, predicting it would expand by 35 per cent this year in non-US markets to $11.6 billion (€9.07 billion). US growth is expected to be nearly 30 per cent higher at $16 billion.
Perry Ellis, the fashion company, says it will advertise on SpiralFrog. Levi's, Aeropostale and others have expressed interest. Other music services such as Napster and YouTube are looking to advertising for their revenues.
Mr Kent said his research revealed that young consumers would be willing to endure advertising as long as the brands and products were relevant to them.
