Rumors of Facebook music service bubbling again

This post was updated at 6:49 a.m. Pacific time to add comment from Facebook.

Facebook may be getting closer to launching a music service that competes with Apple's iTunes, the Financial Times reported Wednesday.

Sources told the publication that Facebook has been approaching major record labels about licensing deals so that it can sell music through its Web site.

It's a long-standing rumor that has once again floated to the surface of social-media chatter.

Music sales would provide Facebook with an alternative revenue stream--the site currently relies on advertising, which many have said is precarious for a social network--and would additionally help it compete with bigger rival MySpace.com, which has a service called MySpace Music in the works and has the big-media backing of parent company News Corp. to give it an extra push in the entertainment industry. For the labels, selling music on already-popular social-networking sites is a way to tap into a youth market that has been abandoning CDs.

But it wouldn't necessarily be a good thing for companies that have built music-related applications on Facebook's developer platform. Some of them, like iLike, Imeem, and CBS Interactive's Last.fm, have ad-supported streaming or paid downloads already tied into those developer applications and it's unclear what would happen if Facebook creates an in-house competitor.

The Financial Times article suggests that like MySpace Music, the shadowy Facebook music initiative would likely offer both streaming music and downloads. "While details remain vague, record executives said that they expected a service would offer consumers free streams of music, supported by advertising, as well as the ability to pay for downloads in MP3 format, which can be played on any device," the Financial Times article stated.

But this all might take awhile. "Facebook Music" is something that has been talked about for months and so far has borne no fruit. Back in October, AllFacebook blogger Nick O'Neill said that he was familiar with someone interviewing for the position as head of Facebook's "music division" and that the social network was already in negotiations with record labels.

But rumors of a full-out Facebook music service grew muddled with early reports about the site's "fan pages," which Facebook encourages bands and artists to create as promotional tools. A Wired blog report about Warner Bros. looking for a Facebook application developer likely dealt with the creation of fan pages and surrounding applications, not an iTunes-like music service as blogger Eliot van Buskirk speculated.

Facebook's "fan pages" launched in November as part of the company's new social advertising strategy. Since then, the company has created "Facebook Music" and "Facebook Film" hubs to promote the creation of those fan pages and offer tools to musicians and filmmakers who want to build a presence on Facebook. And at this month's South by Southwest Festival in Austin, Texas, Facebook will be throwing parties and developer events not only at the geek-saturated South by Southwest Interactive division but also for the indie confab's music and film festivals.

Facebook representatives have stressed that the music and film pages are strictly tied to the fan pages, not any kind of upcoming commerce.

"Facebook did not launch any new music or film products in recent weeks," the company said in a statement responding to a request for comment. Facebook "created informational pages called 'Music on Facebook' and 'Film on Facebook' as guides and resources for musicians, bands and filmmakers wanting to create their own Facebook Pages. The ability for musicians, bands and filmmakers to create Facebook Pages has been available since the launch of the Facebook Pages product on Nov. 6."

The company also highlighted the fact that it does not have a partnership or formal agreement with iTunes and that any links between Facebook and iTunes are on behalf of developers who have integrated them into their third-party applications.

Clearly, Facebook wants to make a play for pop culture, but these latest rumors about big agreements with the record labels aren't much more substantial than the ones we read five months ago.