Music from artists on labels owned by Warner Music Group, the world's third largest music company, will be available to U.S. subscribers of digital music service eMusic, the companies said on Tuesday.

The deal will make 10,000 catalog albums from artists like REM, Depeche Mode and Aretha Franklin available for downloading. But the deal does not include newer hit records.

The new deal is just one of the steps in a concerted plan by eMusic to expand its 400,000 subscriber base.

Chief Executive Danny Stein said the company is in talks with label partners for new licensing deals to allow the website to stream songs to its subscribers similar to services like Last.fm and LaLa.

We have a bunch of things in store for 2010 that will allow us to grow again and that includes streaming, Stein said in an interview. The biggest issue comes with the rights holders being able to take on new business models.

Apple Inc bought LaLa for an undisclosed fee late last year in a sign that the iPod maker has become the latest company to bet on streaming being the future of the digital music business. Warner Music was an early investor in LaLa.

eMusic offers downloads from independent labels and catalog music from major labels to subscribers who pay a monthly fee.

Warner Music is only the second major music company to sign up with eMusic after it inked a deal with Sony Music Entertainment last year. Stein said the company is still keen to acquire rights for more music from Universal Music Group and EMI Music.

Unlike a digital music store like Apple's iTunes or Amazon.com, eMusic members pay a subscription fee of $12 a month through with they can buy 24 songs.

eMusic's owner Dimensional Associates, the private equity arm of JDS Capital Management, has been reported to be considering its exit options as competition in the digital music market tightens up.

There is no impending sale, said Stein. We're very bullish on 2010 and 2011 and if someone came along and paid us upfront for a successful 2010 and 2011 I think you'd have to do that as a responsible shareholder.

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