Microsoft plans to launch a music streaming service with a "similar principle to Spotify," according to a report by the U.K.'s Daily Telegraph.

"Music is an important area for Microsoft. We are looking at launching a music streaming service imminently. It will be a similar principle to Spotify but we are still examining how the business model will work," Peter Bale, executive producer of the company's news and entertainment arm, MSN, told the Telegraph.

The service could arrive as soon as the end of July, and is likely to offer free streaming, subscription-based streaming and paid downloads.

Bale added that he is looking at other business models to help figure out "what will work best for both consumer and Microsoft." The company's entrance into the music streaming market would bring, he says, "scale and a quality of product."

The service would be owned and operated by Microsoft, and be promoted through MSN and other Microsoft network portals. There is also the possibility such a service could link in with the company's Xbox gaming console, though Bale would not reveal exact details.

The service is apparently designed to boost appeal of Microsoft's music player Zune, which has so far struggled to gain a foothold in the iPod-dominated field. A high definition version of the player has recently been announced for the U.S.

Bale said Microsoft was currently in talks with potential download partners.

"In the coming months, MSN is planning a new music service in beta via its Music channel in the U.K.," said a Microsoft spokesperson in a statement. "At this stage we won't be confirming the details behind this but more information will be available soon and will be communicated in due course."

Spotify operates concurrent free ad-supported and subscription-based business models, offering users free music streaming in exchange for audio and visual advertising or no advertising and added features for £9.99 ($16.30) per month. Spotify has also partnered with download store 7digital to offer a-la-carte downloads.

In May, Spotify founder Daniel Ek claimed the service had amassed over a million users in the U.K. and 700,000 in Sweden, where it was first launched.