AOL has announced that Napster will become the exclusive subscription provider for AOL Music, replacing AOL Music Now, which has about 350,000 paying subscribers.

Existing AOL Music Now customers will have their accounts, including music libraries and playlists, migrated over to Napster unless they choose to opt out.

As well as having AOL promote the service with links throughout AOL Music, the deal will allow Napster to expand its subscriber base, which currently stands at  around 560,000.

The company’s CEO Chris Gerog was excited about the deal:

“Napster’s new relationship with AOL provides us with an excellent opportunity to aggressively grow subscribers through deep integration with one of the most visited music destinations on the web.”

After Napster posted a loss of $9.8m (£5.1m) in the three months to June 2006, it had recently been considering sale options, hiring investment bank UBS to look at potential buyers.

However, third quarter results were more promising, causing the company to revise its revenue predictions upwards. With this deal, and optimistic predictions for the future of the digital music download market, Napster may not need to sell after all.