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Monday, April 24, 2006, 06:00 am PT (09:00 am ET)

Labels may buckle in bid for variable iTunes pricing

The record industry may be on the verge of surrendering to Apple boss Steve Jobs and abandoning its demand for iTunes to charge different prices for different songs.

According to a report last week in the NY Post, contract re-negotiations between Apple and the four US major record labels have reached a crucial point, with several record executives now saying they are unlikely to convince Apple chief executive Jobs to allow for variable music pricing.

The comments mark a change of tune for the record industry, which late last year drove headlines with its push for a variable pricing structure that would allow them to charge more than 99 cents for some popular tunes and less for others. All four of the labels —Universal, Warner Music, SonyBMG and EMI North America — have deals with iTunes that will expire in the next two months.

"But Jobs has dug in his heels on the issue, creating the potential for a showdown between the mercurial Apple boss and the record industry should the labels continue to push for variable pricing," The Post reported. "Some executives even mentioned to The Post the possibility that some labels may end up pulling their music from the service, which is by far the most popular of the digital download services."

However, the report notes that a more likely scenario is that contracts will expire and some labels will operate without a deal as they seek to reach new terms.

Up until this point, the labels have charged Apple wholesale prices of between 60 cents and 80 cents per music track, which the iPod maker then turns around sells to customers 99 cents a piece.

During a conference call last week covering its second quarter financial results, Apple said its iTunes music store continues to operate at "above cost," generating a small profit.