US online giant Amazon is preparing to launch a streaming music service as early as this week.

The service will have a more limited catalogue than some rivals but will be offered free and without advertising for customers of Amazon Prime, a subscription service that includes free delivery, access to online movies and books and other advantages.

It’s rumoured that Sony and Warner Music have agreed to terms with Amazon but no deal had been reached with the other major music publisher, Universal Music Group, which carries artists such as Lady Gaga and Katy Perry.

Amazon has been rumoured for months to have been working on a music service but talks appear to have been bogged down over royalties and licensing fees.

Amazon is offering small labels shares of a $5 million royalty pool, and bigger labels and distributors were offered larger one time payments for access to certain titles.

The music could be a bonus for customers of Amazon Prime, the annual fee for which was hiked to $US99 ($A107.11) from $US79 this year.

The move comes after Apple agreed to pay $US3 billion for Beats Music to boost its streaming service and compete with Spotify and Pandora, among others.

Amazon, meanwhile, is widely believed to be preparing to launch its own smartphone that would tie in with its Kindle tablet computers.

AFP