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Universal declines to renew Apple deal

July 03, 2007|Joseph Menn and Michelle Quinn | Times Staff Writers

Universal Music Group declined to renew its yearlong deal to license songs to Apple Inc. in the most public clash to date between a record label and the top retailer of digital music.

The largest of the four major labels informed Apple last week, people familiar with the matter said Monday.

Universal has no plans to stop selling music over Apple's iTunes music store, which sells a majority of digitized tracks in the U.S., the people said.

But top Universal executives wanted the right to offer exclusive tracks to other Web retailers that could emerge, such as

Under the previous deal with Apple, Universal was obliged to sell on iTunes any music it sold digitally elsewhere.

Warner Music Group could take a similar stand when its licensing deal with Apple expires in the coming months, industry executives said.

Now the third-largest U.S. retailer of music, Apple has invigorated the legal market for music downloads. Digital downloads are a growing revenue source for the music labels as piracy has depressed industry sales.

But labels want the freedom to charge different amounts for different songs. The only exception Apple has allowed to the 99-cent price for singles is for EMI, which charges more money for higher-sound-quality songs that also are free of anti-piracy encryption software that limits where they can be played.

The labels also want Apple to allow songs with anti-piracy locks to play on devices supported by Microsoft Corp.

Now that Universal has the right to withdraw its material -- a step analysts believe is unlikely -- it has more bargaining leverage. The four big labels declined to comment. Apple spokesman Tom Neumayr said negotiations with Universal were continuing.

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