Will Microsoft Open Pandora’s Box?

Microsoft (NASDAQ:MSFT) will reportedly launch a new digital music service for its Xbox Live platform to rival Pandora (NYSE:P) and Spotify. No confirmation yet as to when to expect the new platform, but it could be announced at the E3 conference set to take place in Los Angeles in June.

The possibility of such a service was first reported in The Verge. The platform would replace the Zune Music Pass service Microsoft currently offers in favor of more versatility. It is thought the new service will be available on a wider variety of devices and platforms, including Facebook.

Microsoft has been working in recent years to beef up Xbox Live, effecting various agreements with companies like Netflix (NASDAQ:NFLX), Comcast (NASDAQ:CMCSA), and ESPN (NYSE:DIS) to add movies, television shows, and live sports events to its online entertainment marketplace for streaming.

Microsoft already offers Last.fm on Xbox Live, and earlier this week inked a deal with Epitaph Records to stream an upcoming album from a Los Angeles punk band, Pennywise.

Microsoft said time spent watching videos and listening to music on Xbox Live eclipsed the amount of time spent playing online games for the first time since the Xbox 360 launched in 2005. More than 20 million people pay for the premium Xbox Live service, nearly a third of all Xbox 360 owners.