AOL entered the online music business on Thursday, announcing it had acquired digital music company MusicNow. The service will replace AOL's pre-existing MusicNet@AOL offering, and allow the company to offer subscription as well as a-la-carte downloads. Financial terms of the deal were not disclosed.

AOL has launched a preview version of the service at aolmusicnow.com. MusicNet customers will be gradually upgraded to the service, which had previously been owned by electronics retail chain Circuit City.

MusicNow will continue to operate as a separate entity, and now falls under the company's Digital services unit, AOL said.

"The MusicNow transaction allows us to superserve our AOL members and expanding web audience with a truly best-in-class, full-service, digital music platform – giving us the opportunity to offer an unparalleled music service," said Ed Fish, AOL's Premium and Subscription Services chief.

Songs will be available for purchase separately at 99 cents per track. All music downloads will be in Microsoft's Windows Media format with digital rights management.

A subscription service will also be offered in two tiers: for $9.95 USD per month users will have unlimited streaming capabilities plus downloading to a computer; for $14.95 USD per month users can also copy tracks to a PlaysForSure device. Subscribers of the current MusicNet@AOL service will keep their current pricing plans, AOL said.

"We're thrilled to join AOL," said Gary Cohen, President of MusicNow. "The goal now is to become the number one music service."

If being number one is MusicNow's goal, they have their work cut out for them. 70 percent of portable music players sold are iPods, which are incompatible with the WMA format MusicNow utilizes. And according to recent statistics, more than 80 percent of all legal music is downloaded through iTunes.

Unlike iTunes, MusicNow takes a Web-based approach to music sales and is media player agnostic. AOL currently offers AOL Media Player and Winamp, but MusicNow is accessed directly through a Web browser and will not require specific software.

MusicNow is AOL's fourth corporate acquisition this year. In September, the company announced it had acquired the blogging group Weblogs, Inc. The company also acquired Xdrive, an online storage service, and wireless firm Wildseed in August.