The announcement came at the same time as Universal's victory in its litigation against MP3.com.
US District Judge Jed Rakoff yesterday awarded $53.4 million in statutory damages and attorneys fees to the Universal Music Group in its copyright-infringement suit against the online-music site.
Copyright Universal, EMI and other major music concerns filed suits against MP3.com last January . The suits challenged the copying of thousands of copyrighted CDs onto file servers to create My.MP3.com's "locker" service. MP3.com will not appeal against Judge Rakoff's decision.
As the judgement was delivered, the two companies announced that Universal has granted MP3.com a non-exclusive, North-American license for the use of Universal's recordings.
Universal's Zach Horowitz, president and chief operating officer, said: "We believe that continued legal action would have led to a greater damage award. But, it was never our intention to put MP3.com out of business with a large judgement.
"We support the development of legitimate music businesses on the Internet."
Music fans Michael Robertson, chairman and CEO of MP3.com, said: "This is clear evidence that the needs of rights holders and music fans can be accommodated in the digital-music space."
The news follows the announcement earlier this month that Bertelsmann Music Group (BMG) has signed an agreement with Napster to deliver its music catalogue as a subscription-based service using Napster's peer-to-peer networking solution.
Universal announced its plans to trial its own subscription-based digital-music download service last month. EMI and Sony are also engaged in creating similar services.