Universal Music Group is launching a service offering digital music for download over the Internet, according to sources close to the project.

Universal Music Group, a fully owned subsidiary of Seagram Company and the world's largest record label, declined to officially comment on its plans for selling digital music downloads online.

According to one source, Universal has established a security system and encryption method it is comfortable with in conjunction with InterTrust Technologies and is ready to launch a limited version of the download program.

Universal had originally entered into talks with Liquid Audio about securing downloadable music, but the two companies were unable to reach an agreement over royalties, with Liquid Audio requiring a third of all royalty revenue, sources said.

Universal is home to such recording artists as Beck, Limp Bizkit and Shania Twain as well as anti-Napster campaigners Metallica.

Sony Music Entertainment was the first label to offer a limited number of digital music tracks, including single tracks from artists such as Jennifer Lopez, Pearl Jam and Rage Against the Machine.

In July, meanwhile, EMI began offering 100 of its titles for sale over the Internet.

BMG, the music unit of Bertelsmann AG, is expected to start offering digital downloads sometime during the third quarter, with Time Warner aiming for a fourth-quarter launch of its digital music online store.