Well, there goes the neighborhood. First, we get Vivendi (NYSE:V) moving out of online music, and now you-know-who is moving in. Microsoft (NASDAQ:MSFT), according to this morning's Wall Street Journal is preparing a music downloading service for debut sometime next year.

What it will look like is anyone's guess, though the company does have an interesting version on its UK MSN website. MSN Music Club allows users to purchase credits they can then spend to acquire either temporary (can't be copied from your computer to another device) or permanent (can be copied or burned to a CD) downloads of a song. Streaming and preview options are also available.

More likely, we'll see a service based on its Windows Media Player -- perhaps similar to Apple Computer's (NASDAQ:AAPL) iTunes. Whatever the case, you can bet Apple, Napster owner Roxio (NASDAQ:ROXI), CNET (NASDAQ:CNET) -- which bought MP3.com from Vivendi -- and others will be watching.

In the end, consumers can probably be cheered by the way things are shaping up in online music. Especially given the way the early pay-for-play entrants that joined the party between the days of "Bad Napster" and iTunes were panned for being a lot less fun and simple to use than the free alternative of file-swapping.

It's not a perfect situation. The possibility that MP3.com, an excellent repository of largely unsigned and independent artists (I'm partial to The Von Trapps, A Northern Chorus, Asobi Seksu, Halou, Trespassers William and The FLIR) might not last in its present form would certainly be a blow. On the flip side, increased competition and exposure for online music should mean better pricing and service.

That the recording industry is working with its newest and hottest sales channel, meanwhile, suggests that it feels good about the way things are heading. And if today's Journal article includes some nostalgic market-growth projections reminiscent of 1999, it likewise underscores optimism that this is a market worth participating in.

With the music business under the microscope, it looks like the big labels finally realize it's time to play along.

Talk it over either on our Microsoft or Music & Musicians discussion boards. Dave Marino-Nachison can be reached at dmarnach@fool.com .