Microsoft has never had much luck in the digital music space. Their Zune service was relatively ignored and I don’t know a single person who uses last.fm on their Xbox 360. The company may be planning to change that.

CNET got the exclusive scoop from insiders that Microsoft is in talks with record companies to create a new music service to offer on Windows phones and Xbox 360. It remains to be seen if the rumored service will replace the company’s preexisting Zune service or if it will complement the service.

The sources said that the service is still being being planned out with negotiations under way. Microsoft is apparently wanting to launch the service later this year and would allow users to stream and download music.

The rumors suggest that Microsoft is also in talks with HTC and Nokia to implement the new service in their Windows phones.

With the service allegedly allowing users to stream and download music, it would set Microsoft in a much better position to compete with Apple and Google. Both companies already have their own music services on their mobile operating systems – iTunes and Google Music respectively.

Microsoft is obviously moving towards a more media-oriented operating system with Windows 8 and they are already there with the Xbox 360 and Windows phones. You can bet this new service will become a reality this year. It just remains to be seen if their proposed video service ala Netflix will ever take off the ground after negotiations were reportedly halted.