HMV, the music retailer, today unveiled a digital download service which will compete with Apple’s iTunes.

HMV Digital, in which HMV is teaming up with Microsoft, will go head to head with its rival Virgin Digital, which goes live tomorrow, in an increasingly crowded market.

HMV has not given a formal level for its lowest price tracks, it says its online store will offer songs at a range of prices in the same way as its conventional shops.

However, it suggested that some songs could be sold for as little as 39p, if record labels are willing to discount prices to push new acts. Most tracks will be sold for around 79p, in line with Apple's iTunes store.

Songs by some "premium" artists may be more expensive, HMV said. Albums will cost around £7.99 each.

Both HMV and Virgin will give customers access to an online "jukebox" of tracks and albums which can be transferred to computers and digital music players or burned onto CDs. However, they are not compatible with Apple’s iPod, the most popular digital music player.

The HMV Digital website can be accessed through software available for free online or at HMV stores. A rental service called HMV Unlimited which costs £14.99 per month gives users access to a catalogue of around 1.3 million tracks. These can be downloaded on to a computer or a compatible digital music player but they expire if the monthly subscription is cancelled.

Users also get access to online radio stations which are categorised by genre.

John Taylor, e-commerce director for HMV, told a London press conference today that iPod users had bought into a "walled garden" because they could not download tracks from rival sites.

"We don’t expect the iPod to retain the market share it has today for very much longer while it remains incompatible with the rest of the market," he said.

HMV will continue to sell the iPod although it will be the only digital music player in its stores that is not compatible with HMV Digital.

Steve Knott, MD of HMV UK and Ireland, said: "Our research shows that although customers remain very keen to buy and own CDs for the foreseeable future, many are also ready to start downloading for the first time and we are eager to cater to this demand."

HMV Digital goes live on Monday. The Who’s Roger Daltrey and the band McFly will re-record a version of My Generation together to mark the launch. Proceeds of the single will go to the Teenage Cancer Trust.

Virgin Digital goes live tomorrow. The service will cost £9.99 for a basic monthly subscription which gives access to 1.2 million tracks. These can be downloaded to up to three computers.

Virgin’s premium £14.99 monthly subscription allows users to download tracks onto digital music players. All tracks are effectively rented and expire if the monthly subscription is cancelled.

Virgin’s pay-as-you-go service costs 79p to permanently download each track. Album bundles will be available at varying prices.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive