Music fans are downloading a range of songs, not just chart hits

The move comes as competition hots up in the cutthroat music downloads market.

Sony, Apple Computer's iTunes and Napster have already entered the market in a fanfare of publicity.

Loudeye will not compete head on - instead it will supply digitized music services to the big players.

The combined company will supply more than 200 customers in 15 countries including MTV, Tiscali and Virgin Megastores.

Loudeye offers a range of services including 30 second song snippets on Amazon.com to anti-piracy measures for major music labels.

Download fray

Competition in the digital download market is already fierce, according to technology experts, with some very big players already in place.

UK DOWNLOADS, JAN-MARCH 2004 1. OutKast - Hey Ya! 2. Black Eyed Peas - Shut Up 3. Kelis - Milkshake 4. Michelle McManus - All This Time 5. Peter Andre - Mysterious Girl 6. Dido - White Flag 7. George Michael - Amazing 8. Will Young - Leave Right Now 9. Fountains Of Wayne - Stacy's Mom 10. Keane - Somewhere Only We Know Source: OD2

Selling its technical expertise to the big guns is the best chance for Loudeye to survive, analysts said.

A view that OD2 co-founder Charles Grimsdale, who will run the new company's European operations, agrees with.

"Our job is to provide the picks and shovels, " he said.

Music fans are downloading a wide range of songs, with the top 100 downloads accounting for just 11% of sales, OD2 said.

The digital music market has over 100 retailers of music downloaders around the world.

Meanwhile the music industry, battered by piracy, has been keen to stop the slump in music sales.

Non-pirated downloading, it hopes, should sell more music and restore profits.