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Last Update: 1:38 AM ET Feb 16, 2006

SAN FRANCISCO (MarketWatch) -- Amazon.com Inc. is in advanced talks with four global music companies about a digital-music service with features designed to set it apart from and compete with Apple Computer Inc.`s iTunes Music Store and portable music players, according to a media report Thursday.

In formulating a challenge to Apple (AAPL : AAPL

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) , the world`s No. 1 online retailer, is considering Amazon-branded portable music players, designed and built for the retailer, and a subscription service that would deeply discount and preload those devices with songs, The Wall Street Journal reported in its online edition. See Wall Street Journal story (subscription required).

Apple declined to comment, The Journal said.

Amazon`s service could be launched as soon as this summer, The Journal said, citing unnamed people familiar with the matter.

One key way Amazon hopes to set itself apart would involve a subscription service, in which users pay a flat monthly fee for access to an unlimited amount of music, the Journal said.

Subscription services, like those by Napster Inc. (NAPS :

, , )and RealNetworks are typically more profitable for recorded-music companies than ``a la carte`` download stores like iTunes, which doesn`t include a subscription option, The Journal reported.

However, their subscriber bases of 500,000 to 600,000 are tiny compared with Amazon`s 55 million customer accounts, The Journal said.

Amazon declined to discuss the service, and hasn`t finalized deals to license content from major music companies: Vivendi Universal SA`s Universal Music Group (V : V

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, , ) ; Sony BMG, a joint venture of Sony Corp. (SNE : SNE

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, , ) and Bertelsmann AG; Warner Music Group Corp. (WMG : WMG

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, , ) ; and EMI Group Plc. (UK:EMI: news, chart, profile)

Among the manufacturers Amazon has mentioned as likely partners for a subsidized hardware offering is Samsung Electronics Co. (SSNGY : SSNGY

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, , ) , whose flair for stylish design is raising hopes among music executives that the initiative could create a strong alternative to Apple`s iPod, The Journal reported. A representative at Samsung`s headquarters in Seoul, South Korea, couldn`t be reached for comment, according to The Journal.

Amazon`s online music plans would take advantage of the company`s strong position in selling CDs and portable music players, The Journal said.

Amazon sells an estimated 10% of digital music players in the U.S., including iPods, and the pending deal could hurt its relationship with Apple, according to The Journal story.

This would be the first time Amazon tries to sell its own branded player, The Journal said, noting that in January, Dell Inc. (DELL : DELL

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, , ) discontinued its high-capacity DJ music player, which launched in October 2003, because of poor sales. Other retailers, including Wal-Mart Stores Inc. (WMT : WMT

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, , ) and Costco Wholesale Corp. (COST : COST

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, , ) , have developed private-label electronics, such as DVD players, with varying degrees of success, The Journal reported.

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