BSkyB to launch online subscription music service

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By Kate Holton

LONDON, July 22 (Reuters) - Britain's largest pay-TV firm BSkyB (BSY.L) is to launch an online subscription music service and has signed the world's largest music group Universal as its first partner, in a deal that could challenge Apple (AAPL.O).

The service will offer downloads to keep and unlimited listening through streaming for a monthly subscription. The tracks will be in MP3 format, meaning they can be used on many devices including the iPod and mobile phones.

BSkyB will form a new joint venture to launch the service in Britain and Ireland, building on its relationship with millions of customers and Universal's (VIV.PA) hundreds of thousands of tracks from artists such as Amy Winehouse and U2.

The pay-TV group, which has James Murdoch as its non-executive chairman, said it was in talks about signing other music companies including the other major music groups and would release more details at a later date.

"In a world where a majority of UK homes have high speed broadband access, consumers will welcome a safe, state-of-the-art service and legal alternative to those services which exploit musicians without compensation," said Universal's Lucian Grainge. The music industry has been desperately trying to boost digital sales in recent years after piracy hit the market.

But it has been constrained by the dominance of Apple's iTunes service which has more than 70 percent of the digital music market, which some analysts suggest has prevented music companies from negotiating better deals.