Briefly detailed at Microsoft's E3 conference, it has now emerged that the service will launch later this year with an annual subscription model not dissimilar to that of Spotify.
Microsoft are now in negotiations with the "big four" major record labels (Universal Music Group, Warner Music Group, Sony Music Entertainment, and EMI) in order to secure licensing agreements.
As well as streaming online music, the service will also allow customers to buy tracks through other online marketplaces, including Microsoft's Zune store, but more interestingly also through Apple's iTunes and the Amazon MP3 store.
Users will also be able to access their purchases through a "digital locker" which will sync their account with any other devices they have running Windows 8, Microsoft's upcoming desktop and tablet operating system.
What do you think of the sound of Xbox Music? The iTunes tie-in sounds pretty forward thinking of Microsoft, right? Enough to make you cancel your Spotify subscription? Let us know in the comments below!