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The group announced the deal at the annual MidemNet music conference in Cannes, saying it would allow thousands of independent labels across the world to sell digital downloads of their music from their MySpace pages and other sites.

Merlin was launched on Saturday to secure licensing deals with emerging media such as MySpace and YouTube. The group said it would act as the 'fifth major' in the world with a view to rectifying the 'poor cousin' status of deals previously offered to independent labels.

Snocap, founded by Napster creator

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Sean Fanning, will use its retail initiative called Mystore which enables music to be downloaded from Web sites. The Mystore and MySpace tie up will launch in the 'near future'.

The downloads will be sold in the MP3 format, meaning they can be played on any portable music player including the iPod. Currently, Apple's iTunes can only be used with an iPod while music from such popular services as Napster and Rhapsody cannot be played on the mass-selling device.

The agreement, the first of its kind, will be offered to all members of Merlin.

'This immediately opens up what is currently the most popular Web site in the world to the independent labels,' said Merlin Chief Executive, Charles Caldas.

MySpace co-founder Chris DeWolfe told Reuters last year that the group hoped to be one of the biggest digital music stores available.

The hugely popular social networking site Myspace is owned by News Corp.

The independent record label sector makes up for 30 percent of the music sold worldwide, with the rest from the four majors - Vivendi's Universal Music, Sony BMG, EMI Group and Warner Music Group.