Microsoft comes up with iTunes rival -

It seems that Microsoft is not as dumb as many observers think and is planning a new music service which offers streaming with download and online-storage functions similar to Apple's iTunes.

The news, which has leaked out of Redmond, talks about a service to be offered over the X-Box.

But it is clear that this is only half the story. Microsoft this week announced that it is releasing a tablet and wants its partners to offer its Windows 8 OS.

It would be pointless releasing any such hardware without having a content system that matches iTunes and effectively that sounds to us exactly what Vole is designing.

Microsoft is in talks with major record companies for the needed rights, and plans to begin service later this year. Our guess is that it will be piloted on the X-Box so that it is ready for the launch of Windows 8 in October.

According to AP, Microsoft seems to have been watching its competition and has created a system which is supposed to have nicked their best features.

Reports talk of a system that allows customers consume music any way they like.

To get that, it has to negotiate with Big Content including Universal, Warner, Sony and EMI.

Xbox Music seeks to offer streaming for a monthly or annual fee, similar to Spotify nd let consumers buy digital music through an online store, such as Zune, iTunes and Amazon.com.

What might raise Big Content's eyebrow is that it wants to offer Xbox Music users an online locker accessible by multiple mobile devices running Windows 8.

Users could put entire collections online, including music purchased elsewhere, for a monthly or annual fee.

Of course Big Content has sued people for doing that, fearing that once it is installed in any locker it can just be pirated.