Peter Bale, MSN executive producer, told the paper: "Music is an important area for Microsoft. We are looking at launching a music streaming service imminently. It will be a similar principle to Spotify but we are still examining how the business model will work."

Music has also been a confusing area for Microsoft. In recent years it launched and killed ambitious music efforts such as MSN Music, shifting the emphasis from in-house services to partnerships such as the "Urge" deal with MTV.

Lately Zune has been the flagship music effort. The Zune lineup is getting updated this fall and its software and brand are coming to the download section of the Xbox, so even if it's a separate service it seems a little nutty not to link them all somehow.

Bale's reference to Spotify is interesting. It's a new service available only in Europe that delivers free streams of music via the Web, supported by ads, plus an ad-free version for about $16 per month. Spotify also adds social features like playlist sharing.

Zune already offers a $15 per month "all you can eat" music subscription service, with an attached social network. What it doesn't offer yet is a free streaming service.

Maybe this is about selling ads more than subscriptions and hardware. Could Bing be getting a music tab, a new way to sell radio-type ads? They'd probably have some copyright issues with "Bing Music" though.

I found this via Joystiq, which noted that Microsoft just last month announced that music service Last.fm is one of the applications being loaded onto the Xbox.

UPDATE: MSN spokeswoman Hazel Thompson offered a little clarification, saying via email that "in the coming months, MSN is planning a new music service in Beta via its Music channel in the UK. At this stage we won't be confirming the details behind this but more information will be available soon and will be communicated in due course."