Wall Street Journal reports that Viacom-owned MTV and RealNetworks are ready to announce their future collaboration in the online music domain, also signaling the death of MTV’s URGE music download service.

According to the two authors of the WSJ article, Ethan Smith and Nick Wingfield, the move is another desperate attempt from music behemoth MTV to dethrone Apple’s iTunes service from its dominant position in the online music business. According to recent estimates, iTunes is currently the third largest music distributor in the US and the premiere destination for users who want to download tunes for their MP3 players or phones.

RealNetworks, who runs subscription-based service Rhapsody, is also backed by Verizon Wireless, a division of Verizon Communications and Vodafone group, whose interest in the joint venture is to supply mobile distribution for MTV’s content. Apparently, this would give Verizon Wireless a competitive advantage over AT&T, which benefits exclusively from the hype created around Apple’s iPhone.

Moreover, the recent Rhapsody-MTV deal could also be interpreted as the swan song for MTV’s URGE music download service, brought up by the Viacom subsidiary along with Microsoft, when Windows Media Player 11 debuted last year. URGE has not been very successful and it certainly did not overthrow iTunes from customer’s preferences, having managed to attract just a few scattered customers. WSJ said that according to inside sources, Microsoft preferred to invest more in its Zune line of MP3 players rather that sustaining and promoting URGE more.

Signing the partnership would add more value to RealNetworks’ Rhapsody service, thanks to MTV’s popularity among youngsters and also thanks to the music channel’s broader audience. The authors of the article inform us that the two sides have been discussing the partnership for months now and that they’re willing to complete it by September 9, when MTV’s Video Music Awards is scheduled. The agreement could be announced then.

Nothing is yet certain as the spokesmen for the two companies declined to comment on the issue, but according to sources cited by Wall Street Journal the joint venture should be headed by Michael Bloom, who is currently the boss at Urge for MTV Networks.

MTV will bring its content to Rhapsody, a service which offers unlimited music downloads for $12.99/month, also including music blogs. Mika Salmi, the president of MTV Networks' global digital media, is a former RealNetworks executive.

MTV’s plans stretch way beyond the music world, where the channel is the king, the company announcing a massive $500 million investment in the games industry, which debuted with the acquisition of Guitar Hero developers, Harmonix Music Systems.

It remains to be seen whether the new partnership stands a chance in front of Apple’s tight grip on online music sales, since the Cupertino, CA-based giant has both the software (iTunes) and the hardware (iPod, iPhone) to promote its service.

This is what Microsoft is trying to do with Zune and Zune Marketplace, but apparently fails.

A good opportunity for all sides involved in the deal would be to speculate the ever expanding market of the music phones, considered the next big platform on which content owners will reach their audience.

More than half of the one billion mobile handsets shipped globally are expected to have music-playing capabilities in 2007, analyst house Portio Research predicts. MP3-enabled handset sales are expected to be highest in northern and Western Europe with 95 per cent of mobiles predicted to be MP3-enabled by 2011 in the region, the company’s research reveals.

Warner Music’s boss Edgar Bronfman Jr. confirmed during this year’s 3GSM conference in Barcelona that the wireless-music market is likely to face an “explosive growth” in the future, with the money spent on downloading songs and ringtones forecast to jump to 32 billion USD by 2010, compared to an estimated $9 billion this year.

The increased consumption of digital music on mobile phones will boost the global music market, with worldwide revenues expected to rise from $32.1bn in 2006 to $38.8bn come 2011, according to Portio.