Big stuff coming from the music industry today, News Corp’s MySpace, the world’s largest social network Web site, has formed a joint venture with three major music companies called MySpace Music, it said on Thursday, in a challenge to Apple Inc’s dominant iTunes Music store.  The joint venture includes Vivendi’s Universal Music Group, Sony BMG Music Entertainment and Warner Music Group as minority stake holders in the new company.

MySpace Music will offer free music audio and video streaming supported by advertising, paid-for MP3 downloads, ringtones, artist ticket sales and merchandise. Chris De Wolfe, chief executive of MySpace, described the launch date of the new service as “fluid” with commercial features being added to the site over the coming months. He said MySpace is in talks with more music industry partners to offer their services on MySpace Music.

MySpace said the new product will integrate its existing 5 million artist profile pages with the range of new commercial services in a “360-degree” offering that will be available to its 30 million-strong music fan base.

MySpace Music is seen as a potential rival to Apple Inc’s iTunes Music Store, which takes more than 70 percent of digital download sales and is the No. 2 music retailer in the United States behind Wal-Mart Stores Inc. The music industry has been concerned about a lack of competition for iTunes in the digital music market.

The music industry, fearful of Apple’s outsized influence over its business, sees another competitor in the song downloads business as a crucial element. “This gives a great new lease of life for the download market,” said Thomas Hesse, Sony BMG president of global digital business.

Financial terms of the new partnership were not disclosed.  But you can expect this one to be lucrative for both players. The deal went through late on Wednesday after Universal Music agreed to settle a 2006 copyright infringement lawsuit against MySpace. A source familiar with the negotiations said MySpace had agreed to pay Universal as much as $100 million to settle. EMI, the fourth big music company, was not part of the initial deal. MySpace’s De Wolfe said his company is talking to all music partners but would not comment on EMI.