The joint venture, which also will include event promoter AEG, will be focused on developing content from live concerts and comedy performances for distribution through AOL and XM.
Dubbed Network Live, the venture will be headed by Live 8 Executive Producer Kevin Wall, and will draw heavily from theof the Live 8 shows.
"We've put together the new dream team in these areas," AOL Chief Executive Officer Jon Miller said during a press conference announcing the venture. "The Network Live venture heralds the next stage of digital entertainment, where content becomes more valuable and more expansive though all these mediums."
The new venture illustrates a growing hunger for original content online and off, as media companies fight to separate themselves from rivals that offer largely similar programming.
Most of the big music services, including Apple Computer's iTunes, offer access to a broadly similar range of material from large and independent labels. Each of them heavily touts the relatively small percentage of exclusive content on their sites at any given time.
But the value of live shows themselves has been rising over the past year as well. Radio and promotion giant Clear Channel Communications has purchased a patent on the process of producing CDs from live shows in order to sell recordings of concerts in its venues.
AOL itself has already profited from its "Sessions" content, essentially live performances by artists recorded in its studios. That content is available online and has found its way into Time Warner on-demand cable channels.
The joint venture's live concert material will be distributed online and through the satellite radio service, but will also be available though other mediums such as video on demand, wireless and HDTV, the companies said.
News of the venture was first reported by the Paid Content Web site.