Chicago-based FullAudio said its service is set to launch in March.
"There is an opportunity for music services to evolve and really deepen the (music) experience," said Jonathan Usher, group manager in the Windows digital media division at Microsoft. "It's not necessarily just about the music itself; it's also about additional information and additional experience...(such as) information about music, artists and album art, and so on."
The announcement comes shortly after the major labels launched two competing subscription services, MusicNet and Pressplay, in a move to shift the online music scene from free file swapping to paid services.
The deal shows increasing momentum for Microsoft's digital music technology. Pressplay and Listen.com's Rhapsody music services also use Microsoft's Windows Media, while MusicNet relies on a competing format from RealNetworks.
FullAudio, which has licensed content from Universal Music Group, EMI Recorded Music, EMI Music Publishing, Universal Music Publishing Group and BMG Music Publishing, is one of the few services that plans to allow customers to copy music onto portable devices.
Phil Benyola, a digital media research associate for investment company Raymond James Financial, said the ability to store songs on portable devices will be a "significant incentive to bypass the MusicNet or Pressplay option."
Others to allow this option include digital audio company RioPort, which last month sealed a music distribution deal with BMG Entertainment. Under the deal, RioPort said it secured rights to distribute BMG songs via its upcoming music subscription service, dubbed PulseOne.