The world of online music streaming is heating up. Microsoft will soon compete with music-streaming service Spotify and Rdio with the launch of Xbox Music tomorrow on the Xbox 360, when Microsoft does its next Xbox Live update

According to TechCrunch, “Xbox Music seeks to combine all the best aspects of the existing music services, by enabling free and paid models for streaming a vast library of content, as well as the ability to purchase and download music to your devices. Microsoft has licensed music from all the major labels, as well as a ton of independents, giving the Xbox Music services more than 30 million songs in its catalog.”

After a 30-day free trial, Xbox Live Gold members will have to pay $9.99/month or $99.90/year to access Microsoft’s 30 million global song database (18 million for U.S. users), licensed from both the major record labels and independents. This is comparable to Spotify Premium‘s $9.99/month fee.

On October 26, the service will also become available to Windows 8 PC and tablet users for free, though ad-supported and only unlimited for the first six months. It will be available for the Windows Phone 8 in the near future.

Like Spotify, Xbox Music will allow users to search by album, artist, or song and compile playlists across enabled devices. Like Pandora, Xbox Music will offer a radio stations based on similar songs or artists. Users will be able to pause a song on one device and resume on another.

The next Xbox Live update, in which Xbox Music will be included, will effectively erase all references to the Zune or Windows Media Player on the console. Check out the video of Xbox Music and let us know what you think in the comments?

What do you think of Xbox Music? Are you currently a Spotify or Rdio user?

[Photo via TechCrunch]