As next week’s iPhone event draws nearer, and rumors of an October gig continue to swirl, the tech world is scrambling to figure out what Apple will announce. We know new hardware is on the menu, but what about software?

Obviously iOS 6 is about to launch, and we continue to hear talk of an iTunes refresh. But according to a new report, Apple has something else up its sleeve: a custom-radio service, similar to Pandora, that will stream music…

The Wall Street Journal reports:

“Apple Inc. AAPL is in talks to license music for a custom-radio service similar to the popular one operated by Pandora Media Inc., according to people familiar with the matter, in what would be a bid by the hardware maker to expand its dominance in online music.

Apple’s service would work on its sprawling hardware family, including the iPhone, iPads and Mac computers, and possibly on PCs running Microsoft Corp.’s Windows operating system, according to one of these people. It would not work on smartphones and tablets running Google Inc.’s Android operating system, this person added, highlighting the mounting battle for mobile dominance between the two technology giants.”

This isn’t the first time we’ve heard reports that Apple was working on such a service. Back in May of this year, TechCrunch reported that Apple was working on a full-on Spotify competitor, but negotiations were stalling.

In fact, Apple has apparently been mulling over a custom music streaming service for several years now. But due to licensing fees and other complications, the idea never made it to market. This time could be different though.

“The company has in the past contemplated and abandoned other interactive features, including a Spotify-like service that would have let users rent unlimited amounts of music for a fixed monthly fee. But people familiar with the current talks say they appear to be more serious than those previous tentative inquiries.”

The report goes on to say that the service will be free, accompanied by advertisements from Apple’s iAD platform. And it could be ready for a public launch “in a matter of months.” We’ll believe it when we see it.

What do you think about the idea of an Apple-branded streaming music service?

Update: So this is pretty interesting: The New York Times has just published a strikingly similar story, saying that Apple plans to “Challenge Pandora in Web Radio” to further extend its dominance in digital music.

“In a move that could shake up the growing field of Internet radio,Apple plans to develop a service that would compete with Pandora Media by sending streams of music customized to users’ tastes, three people briefed on the plans said late Thursday.”

The report says that Apple is just in the early stages of negotiations with music labels, though it agrees with the WSJ in that the service will have ads (via iAds) and that it’s just “months away” from launching.

It’s still not known whether the service is far enough along for Apple to mention it next week (or in October). But with two major news outlets reporting such a similar story, we have to believe there’s something to it.