Amazon, most famous for shipping books and CDs in the post, has started to look prehistoric as the iPod generation downloads music in seconds from Apple's all-conquering online music store.

But the company is hatching a plan to topple Apple's iTunes, with the launch of its own downloading service and, most intriguing of all, a possible rival to the iPod. Geeks are already calling it the "aPod".

The company is in advanced talks with the big four record companies to sign up the music content it needs, and has been sounding out the leading digital device manufacturers, including Samsung.

A thunderous marketing launch could come as soon as the summer.

The rumours have reached fever pitch in recent days, and there were suggestions late last week that Bezos plans to sell the cut-price Amazon music player bundled with a flat-fee all-you-can-download service based on the company's website. The Orchard Enterprises, the largest digital distributor of independent music in the US, is in talks with Amazon.

It is no secret that the music industry's senior executives have been looking for a serious rival to iTunes in the hope of clawing back power to set prices. The industry and Jobs have sparred over iTunes' refusal to charge more for certain music.

So far, though, subscription services have hardly made a dent and iTunes has an estimated 80% of the market. Napster and Microsoft's MSN are among many high-profile brands that still have not cracked it.

Google is believed to be examining the possibility of moving into music downloading too. But it appears to have cooled on the idea and denied recent rumours that it was about to take over Napster.

So why do the four big music companies . . . Sony BMG, Warner Music, EMI and Universal . . . think Amazon can succeed where others have failed?

In short, because Amazon starts with 55 million customers, many of whom have bought music . . . albeit in physical form . . . through the site. It is also likely to offer digital versions of albums and films to customers who buy CDs and DVDs, helping to attract people who are only slowly adapting to the new technology.

Martin Pyykkonen, an internet analyst at Hoefer & Arnett, said: "I don't know if I would bet on them taking the number one slot from Apple, but Amazon does have a very strong brand and the potential to capture market share in a digital music market that is showing strong enough growth to support new players."

Warner Music, home to Green Day, Madonna and James Blunt, said this week digital revenues over the Christmas quarter had more than tripled on 2004 and were 30% higher than the previous three months. It has not made up for falling CD sales yet, the company said, but digital sales . . . without shipping costs . . . are much more profitable.

Amazon has remained tightlipped on its plans, which are still not signed with the record labels and have not been finalised, but observers believe the bundling of its service with a new music player could be one of the keys to success.

According to one internal proposal, the device could be pre-loaded with music. That would set it starkly apart from the iPod, which is usually sold empty, forcing users to spend hours uploading CDs. Visits to downloading sites surged 50% above average on Christmas Day as recipients of new gadgets filled them with music.

Apple has established its hegemony because of the unique format used by iTunes and iPods. The ubiquity of iPods, and the failure of other electronics companies to come up with an equally desirable player, has raised compatibility issues for downloading music in other formats.

The design of any "aPod" would be crucial, in that case, and raises other worries. One Wall Street analyst pointed out that one in 10 music players sold in the US, mostly iPods, are bought on Amazon.

"I imagine Apple and Amazon will be having some heartto-heart negotiations, and there will be some friction between them, particularly if Amazon is undercutting the iPod, " he said. "Ultimately, I think Amazon can be confident Apple will decide Amazon remains a strong distribution channel for them."

Apple shares have fallen over 15% from their peak early this year, as Wall Street has feared growing competition.

The decision to cut prices of the iPod nano last week was taken badly.

But Amazon, too, has been under pressure. Investors have been making shrill demands to get sight of its digital strategy, concerned that the company's internet stock rating may be inflated. Bears think the stock should be valued more like a traditional retailer, since its sales growth is set to slow below 20% this year.