The new as-yet-unnamed venture, in which BSkyB is the majority shareholder and Universal is an equity partner, aims to launch by the end of the year.
The service, which is likely to be Sky-branded, will offer a monthly subscription service as a counter to iTunes' track-by-track purchasing.
The subscription will give users unlimited access to streamed tracks plus a set number of download-to-own songs, initially to Universal Music's catalogue of hundreds of thousands of songs from artists including Amy Winehouse, U2, Kanye West, Duffy, Rihanna, Eminem, Elton John and Abba.
Click here to read Mark Sweney's full report via The Guardian.