• by Gavin O'Malley  @mp_gavin, November 4, 2005

Seeking to generate more revenue from the burgeoning digital music market, America Online Thursday previewed a new Web-based music service.

Coined AOL Music Now, it's a blend of AOL's existing subscription music service, MusicNet, with MusicNow, a Chicago-based company that AOL purchased this week from Circuit City Stores. Financial terms of the deal were not disclosed.

The service will offer single downloads for 99 cents each, and all-you-can-eat subscriptions ranging from $10 to $15 a month.

Spending on digital music services has mushroomed in the last year, thanks to Apple's iPod and other portable MP3 players. The Online Publishers Association this week released a report stating that consumers spent $114.9 million in the first half of the year on non-subscription online entertainment.

Erik Flannigan, AOL's general manager of music, movies, television, and radio, said that the company expected to draw users from the Web at large, as opposed to AOL subscribers. "We're going extremely mass market with this," he said. "Now, we're right on the Web--no downloading any application--so the service is extremely accessible."

AOL will maintain a relationship with Circuit City--which bought MusicNow in 2004--for future cross-marketing initiatives on- and off-line, according to an AOL spokeswoman. AOL will gradually shift the MusicNet subscribers to MusicNow over the next several months, the spokeswoman added.

Using MusicNow does not require consumers to download separate media player software. The service also offers several personalization features, including daily custom playlists, and community features, such as the ability to view and share music profiles with other users.

MusicNow's 40 employees, including its president Gary Cohen, will remain on and report to Amit Shafrir, president of AOL Premium Services, and Ed Fish, senior vice president and general manager of AOL premium and subscription services.