NEW YORK - UNIVERSAL Music Group is in discussions with other major labels to launch an online music subscription service that will be initially free with some digital players.

Called Total Music, the service is aimed at boosting Universal's digital media revenue as CD sales plummet, the source said. It could also help reduce the leverage that Apple Inc has on the digital music market.

Doug Morris, chief executive of Universal, the world's largest music company, has been speaking with Sony BMG Music Entertainment and Warner Music Group about the proposed service, the source said. Another source said such talks had been taking place.

Morris has also met with Microsoft Corp chief Bill Gates in the last fortnight, according to the first source. All the companies declined comment.

Music executives have said the lack of stronger competition in the digital music market, dominated by Apple's iPod player and the iTunes online store, has hampered growth. A service like Total Music could allow music labels to cut exclusive deals with hardware partners, such as Microsoft, which is still trying to gain traction for its Zune media player, or with wireless phone companies like AT&T Inc.

Total Music is envisioned as a service integrated into new digital devices, the first source said. For example, a phone would have a 'Total Music' on-screen button offering a large library of music for a free promotional period, which may be as long as six months to a year. Executives are betting that subscribers will be willing to pay a monthly charge after they get used to the service.

Though the talks, reported by BusinessWeek on its Web site over the weekend, are still at an early stage, the music companies expect device makers or wireless service providers to underwrite promotion costs, the source said.

All the major music companies are exploring new business models, such as selling music in the social networking space and backing more advertising-supported services. Universal, owned by French media giant Vivendi, indicated its plans in July when it refused to sign a long-term deal with iTunes in order to have the right to sign exclusive partnerships with other players.

The company, whose artists include Black Eyed Peas, Amy Winehouse and 50 Cent, has worked with its peers to launch digital services in the past. In 2001, while reeling from the impact of millions of fans illegally trading songs online through file-sharing service Napster, they clubbed together to set up two different digital services.

One service called PressPlay was backed by Sony and Universal, while the other called MusicNet was backed by EMI Group, Warner and BMG. Both services were eventually sold. -- REUTERS