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AT&T's Mobile Music Play With Napster

Today AT&T unveiled Napster Mobile to allow AT&T wireless users to browse, sample, and buy music from Napster's 5 million song library, all directly on their cell phones. This starts in mid November. It's a key announcement ahead of AT&T's earnings Tuesday morning at 10 eastern.

The past four quarters AT&T has beaten Wall Street's expectations, so I"ll be watching how this new music patnership plays into AT&T's growth strategy. This will help the biggest U.S. mobile service provider better compete with Verizon and Sprint , who already have broad music services.

This is a dramatic sign that AT&T is switching to an 'over the air' download model from a sideloading one (where you hook up your phone and computer with a cord). AT&T would rather get people to download directly to their phone, to use 'data services'--AT&T's division that's growing the fastest, 400% a year, with its revenues up 67% in the second quarter from the year-ago period.

AT&T does already offer some music--Napster songs can transfer music from computers to their phones, and in July it started a download service called eMusic, focused on indie music. But this music deal is much more far-reaching.

This is separate from AT&T's deal with Apple's iPhone. AT&T is the sole wireless provider for the iPhone, which can also get music directly to the gadget without hooking up to a computer. But the iPhone works through a WiFi Network and not a cell signal.

There's one notable difference--Napster Mobile downloads cost twice that of iTunes songs but AT&T doesn't think that'll be a problem, because when people are buying songs on their phones, it's a true impulse buy: when people are most price in-sensitive.

This is great news for Napster--gives the company-access to a huge new potential user base.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.