Less than a month after Pepsi announced a blockbuster deal to give away 100 million downloads from Apple's iTunes music service to its customers, McDonald's is close to a announcing a much bigger deal, The Post has learned.

In a dramatic move that gives a thumbs up to the music industry's efforts at creating legal alternatives to file sharing, McDonald's plans to give away up to 1 billion songs in a marketing campaign, according to sources familiar with the matter.

A spokesperson for Apple declined comment, and a representative of McDonald's was unavailable for comment.

Both Pepsi and McDonald's are paying Apple's retail price of 99 cents per song, sources say. And McDonald's has arranged to buy up to a billion songs to meet customer demand.

But because not all customers will take advantage of the offer, McDonald's actual spending on the campaign will probably be in the hundreds of millions of dollars.

The plans by two of the largest consumer goods companies to spend a significant amount of promotional money on music sharing is a validation of Apple's revolutionary iTunes service - and a ringing endorsement for the beleaguered music industry.

It is unclear how McDonalds will use the free downloads in a promotional campaign. Pepsi will place special redeemable codes in the caps of bottles of Pepsi, Diet Pepsi and Sierra Mist. (Although it will place iTunes wrapping on 300 million bottles, only 100 million will contain the codes.)

The Pepsi iTunes promotion will kick off with a Super Bowl ad on Feb. 1, 2004 and run until March 31.

Pepsi and iTunes made their announcement last month to coincide with the launch of iTunes' service for Windows users. "This historic promotion to legally give away 100 million free songs will go down in history as igniting the legal download market," Apple CEO Steve Jobs said at the time.