Entertainment retailer HMV Group is paying £7.7 million ($12.6 million) for a 50% stake in digital media company 7digital, which operates international download stores.

The joint venture will combine London-based 7digital's technology, expertise and licensed catalog with U.K.-based retailer HMV's brand, supplier relationships and consumer reach, according to an HMV statement.

HMV's partnership with 7digital follows the retailer's expansion into the live business in January in a joint venue with U.K. venue operator the Mama Group.

Under the new agreement, 7digital will become HMV Group's single supplier for all its existing digital operations. The entertainment retailer's digital operations in the U.K. and Canada will be revamped with 7digital's technology and a catalog of more than 6 million digital tracks as well as video entertainment.

"This is an exciting step for HMV which transforms our position in the fast-growing digital market," said Simon Fox, chief executive of HMV Group, in a statement. "We believe 7digital is the best partner to help us accelerate our growth in digital entertainment and to become a major player in the market for legally downloaded entertainment. Along with our recent initiatives, it demonstrates the Group's continuing focus on transformation in structurally changing markets."

As well as operating its own download stores, 7digital powers other services for partners and clients across Europe and the U.S. including Spotify and Last.fm, as well as major labels and artists. It is working on a mobile entertainment download app for RIM's Blackberry devices.

Following the HMV JV agreement, 7digital will continue to service its existing and future customer base while "leveraging HMV's extensive relationships with entertainment industry suppliers to develop new digital entertainment services," according to a statement.

CEO Ben Drury and CTO James Kane, who co-founded the company in 2004, will continue to lead 7digital with the support of their senior management team. A new joint venture board will include

"We're thrilled to be teaming up with HMV," said Drury in a statement. "Combining our experience in digital and HMV's brand, customer base and wealth of experience in music, video, games and book retail, we are creating a powerful force in digital entertainment. With consumer adoption of legal digital media now reaching the mass-market, this joint venture partnership is great news for our customers and suppliers."

According to its own forecast, 7digital is expected to make an EBITDA loss of around £1 million ($1.6 million) for the year ending Dec. 31, 2009.