Apple’s iTunes music store will face a challenge to its dominance of legitimate music downloads when a service offering free, legal songs is launched in December.

SpiralFrog, which will generate income from advertising rather than sales, has received the backing of Universal Music Group, the world’s largest record label.

According to SpiralFrog, Universal has given the firm permission to make its vast collection of music available for download. The record label did not return calls this morning.

The service will initially be available only in the United States and Canada, and the company confirmed that downloaded tracks will include a form of digital rights management, which limits the number of times a song can be copied or the number of devices that will be able to play it.

"Offering young consumers an easy-to-use alternative to pirated music sites will be compelling," Robin Kent, SpiralFrog’s chief executive, said in a statement. "SpiralFrog will offer those consumers a better experience and environment than they can get from any pirate site."

Simon Dyson, a senior analyst at Informa Telecoms and Media, said that the site’s success would depend on getting the support of the other record labels. "I’d be surprised if it would launch without the support of all the music companies," he said, suggesting that people want to be able to go to one site and find all the music they want.

Mr Dyson also said that SpiralFrog would have to find a level of advertising that produces sufficient revenue without putting off customers. "They’ll have to get the balance right," he said. "If people have to click on too many adverts before they get to the download then they’ll give up."

Online advertising is becoming increasing popular with companies that want to reach teenagers and young adults with disposable income, who are spending less time watching TV and more time online. Websites geared towards a particular audience, such as music download sites, can also provide a much more focused audience than traditional marketing via television, newspapers and billboards.

Mr Kent said that most of the site’s users would be aged between 13 and 34. "This is the core audience we will attract by … delivering what the majority of users want – content they pay for only with their time," he said. "It’s content that advertisers are willing to pay for on their behalf."

The market for legal digital downloads is growing quickly and reached $1.1 billion (£575 million) last year, according to the International Federation of the Phonographic Industry.

About 80 per cent of legal downloads come from iTunes, but Microsoft is planning a double challenge to Apple later this year. The software company will launch an MP3 player to rival the iPod and a digital music store to rival iTunes.

Mr Dyson said that Microsoft is more likely to be concerned by SpiralFrog than its competitor. "Apple has an established brand and I would think that people who use iTunes are happy to pay for the service," he said.

"Microsoft might be more worried. They’re launching their rival digital music player and store and the last thing they want is someone saying ‘come here and get it free’."

Despite the growth in the legitimate music market, it is still dwarfed by the trade in pirated tracks. According to the IFPI, for every song bought legally from the internet 40 are downloaded illegally.

Many commentators blame the music industry for its predicament, pointing to a cripplingly slow reaction to the growth of the internet. Record labels spent years resisting online sales as they attempted to preserve their CD-based business models.

This allowed internet firms such as Napster (which is now a legitimate music store) and Kazaa to establish themselves, while many people developed the habit of getting music without paying. Record labels have recently been trying to claw their way back into the market.

"There’s a recognition in record companies that they were too slow, and they’ve opened themselves up to experimenting with new business models," Mr Dyson said. They are losing so much money through pirated music that they have little to lose, he added.

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