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XM Radio tunes in online music service

Commercial-free service will be available at a discount to existing customers of the satellite radio operator.

Satellite radio operator XM Radio on Wednesday announced plans to launch an online music service.

The Washington, D.C.-based company said the service, dubbed XM Radio Online, will launch sometime in early October and operate commercial-free, just as its satellite programming does. XM will charge $7.99 per month for unlimited listening and offer a discount rate of $3.99 to subscribers of its existing radio services. The company's main business is a commercial-free radio service that's used with its portable satellite radio receivers, which are designed for use in homes and cars. The company currently claims about 2.1 million subscribers.

XM's announcement highlights growing momentum in the online music space, which has experienced dramatic growth over the last year, with the success of Apple Computer's iTunes digital music store and new products from other major IT players, including Microsoft and RealNetworks. On Tuesday, Internet portal giant Yahoo announced a $160 million buyout of Musicmatch, a music download service that also provides Web radio programming similar to XM's planned offering.

The introduction of XM's online service signifies an expansion in the array of options available to consumers who want to listen to the satellite specialist's programming on their PCs. Last year, the company introduced its XM PC Receiver, which connects to most home computers and tunes in broadcasts from XM's two satellites and 101 stations.

XM recently scrapped the XM PC Receiver because the device could be used with third-party software to download music from its radio stations onto home computers. It is believed the company decided to discontinue the product based on piracy litigation concerns; recording companies and the Recording Industry Association of America have aggressively pursued vendors who market technologies or services they perceive as violating copyright guidelines.

As part of its online radio launch, XM is partnering with Dell to offer consumers a trial subscription to the online music service when they purchase the PC maker's Inspiron notebooks and Dimension desktop computers. The promotion, slated to begin in mid-October, will grant buyers of Dell computers 30 days of free XM programming.