Universal Music declines long-term iTunes deal: source

NEW YORK Mon Jul 2, 2007 12:45am EDT

A customer checks out the Apple iTunes music store at an Apple store in Tokyo, in this August 25, 2006 file photo. Universal Music Group, the world's largest music company, has declined to sign a long-term deal with Apple Inc.'s iTunes music store, leaving open the possibility for exclusive deals with other services, an industry source said on Sunday. REUTERS/Kiyoshi Ota

A customer checks out the Apple iTunes music store at an Apple store in Tokyo, in this August 25, 2006 file photo. Universal Music Group, the world's largest music company, has declined to sign a long-term deal with Apple Inc.'s iTunes music store, leaving open the possibility for exclusive deals with other services, an industry source said on Sunday.

Credit: Reuters/Kiyoshi Ota

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NEW YORK (Reuters) - Universal Music Group, the world's largest music company, has declined to sign a long-term deal with Apple Inc.'s iTunes music store, leaving open the possibility for exclusive deals with other services, an industry source said on Sunday.

Universal will continue to sell music and videos of artists including 50 Cent, Mariah Carey and Black Eyed Peas via iTunes on a month-to-month basis, rather than be locked in to a two-year agreement Apple had proposed, the source said.

The music company, owned by French media giant Vivendi SA could now agree to offer significant portions of its repertoire exclusively to new partners, potentially weakening Apple's dominant hold on digital music retail.

Apple currently has more than 70 percent market share of all digital music sold in the United States. It also sells the most popular digital media player, the iPod.

The two sides had extended a previous two-year agreement by 12 months last summer, and that deal expired last month, the source said.

In effect, Apple will now have similar terms to those that Universal already has with the majority of its retail partners.

Some music executives have privately expressed frustration that Apple's dominant position may have hampered growth of the fledgling digital music market by keeping users locked within the Apple system.

Those concerns were further highlighted with the launch of Apple's iPhone last weekend, which they believe may give Apple further control in the mobile phone-based digital music market.

Apple, which only sells digital music via iTunes, has now overtaken Amazon.com to become the third largest retailer of music in the U.S. behind Wal-Mart Stores and Best Buy Co..

Universal, which produces one in three albums sold in the United States, has been leading the push by music companies to demand that new technology and media partners who want to license music share in the proceeds of the new products as well. Last year Universal signed a deal with Microsoft Corp. to take a small share of sales of its digital media player, the Zune.

An Apple spokesperson was not immediately available.

(Additional reporting by Scott Hillis in San Francisco)

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