MySpace is working on a digital music store, striking a deal with three of the big four music companies to start a music Web site.

The New York Times reports that MySpace will spin out its MySpace Music service as an independent joint venture, in partnership with Universal Music, Sony BMG and Warner Music Group. EMI is expected to join the group. The music companies will own minority stakes in the venture and will make their entire music catalogs available

Visitors to the site will be able to listen to free streaming music, paid for with advertising, and share customized playlists with their friends. They will also be able to download tracks to play on their mobile devices, putting the new site in competition with similar services like Apple, Amazon and eMusic.

A subscription-based music component, where users pay a monthly amount for unlimited access to downloadable tracks, is also being considered, Mr. DeWolfe said.

“This is really a mega-music experience that is transformative in a lot of ways,” he said. “It’s the first service that offers a full catalog of music to be streamed for free, with full community features, to be shared with all of your friends.”

Additional products like tickets, T-shirts, ring tones and other music merchandise will also be available. “It’s the full 360-degree revenue stream,” Mr. DeWolfe said.

While more competition in the field of digital music would be good, this sounds more like collusion than competition, with the major record labels willing to do anything to compete with iTunes.

MySpace Music also sounds like it’s competing with the iTunes Music Store of 2003, instead of trying to offer something new and compelling. The way to compete with iTunes is to make the world of free music as easy to use as Apple as done with commercial music.