Owned by News Corp., MySpace is reportedly in discussions with all four major record labels. Although the finer points of an agreement have yet to be worked out, speculation centers on two music delivery methods – streaming and free downloading.

While the streaming would be advertising-supported, there are mixed signals regarding what type of downloads would be made available. While WSJ reports that the downloads might play on any portable device, including iPods, thus ruling out any digital rights management technology, the same article mentions a Napster-like subscription model, which would definitely employ DRM, thus ruling out 100 percent compatibility with all players.

But a few issues must be resolved before all parties can reach an agreement. For example, UMG is currently suing MySpace for copyright infringements. And there’s nothing like an infringement lawsuit hounding you when you want to make a deal.

Apple Bits

Apple has reshuffled its iPod Shuffle strategy by introducing a 2GB model while dropping the original 1GB Shuffle to the bargain basement price of $49. The new 2GB Shuffle will cost $69.

Apple has also made a deal with Fox Broadcasting Company, Fox Interactive Media, 19 Entertainment and FremantleMedia to sell “American Idol” top 12 contestant performances exclusively on iTunes.

“Idol” fans can purchase performance audio tracks for the iTunes standard price of 99 cents and videos for $1.99. All content will be made available on iTunes the day after the program airs. Fans pre-ordering performances by their favorite “Idol” contestants will receive automatic downloads the day after airing.

“We have some truly outstanding talent this year, and by working with Apple and iTunes, we’re giving viewers another great way to enjoy America’s brightest new stars from ‘Idol,'” said the show’s creator Simon Fuller, who also runs 19 Entertainment. “I’m sure there will be many memorable performances that viewers will want to relive from this 2008 season.”