The arms race between the Amazon and iTunes digital music stores is heating up, thanks to an agreement made yesterday between the CBS-owned Last.fm and all four major record companies. As part of the deal, Last.fm will give users access to any song they like and stream it for free thanks to ad revenue that will come from page views and demographically-specific videos. Listeners are permitted three free streams per song, after which they are given the option of purchasing an mp3 of the song from the Amazon music store. The deal is a major coup for Amazon, as Last.fm’s twenty million users will be directed to iTunes’ biggest competitor as opposed to the Apple giant. While the Last.fm music catalogue has ballooned to 3.5 million songs, according to co-founder Martin Stiksel, “The mission is to have every track available.” Last.fm is also reaching out to independent artists by adding an ad revenue plan that pays the artist a royalty for every stream they get.

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[Photo: Filo/CBS]