The highly anticipated Google music service is being tested by Google employees, indicating that a public launch of the iTunes rival is not too far off.

Music industry sources have told Cnet that the company is testing the service on its employees before launching it for the public.

Reports about a cloud based music streaming service from Google were first confirmed by Motorola Mobility CEO Sanjay Jha, who let out that the Android 3.0 Honeycomb would come with a music service.

“If you look at Google Mobile services [via Android] today, there's a video service, there's a music service – that is, there will be a music service,” Jha said at the time. Over 2 weeks ago a developer who ran Android 3.0 on his smartphone discovered that he was already able to sync music files to the cloud, which confirmed Jha's proclamation.

Cnet sources revealed that the launch of the service is being delayed because Google has failed to make a deal with record companies. The company not only wants to get music streaming and download rights, it also wants cloud rights, that would allow users to store their existing music collection in a digital locker.

Google is already negotiating a deal with some of the top music publishers including the four largest record companies.