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Record Labels May Back Down Over iTunes Pricing

The record industry may be on the verge of waving the white flag in front of Apple (AAPL) boss Steve Jobs and abandoning its demand for iTunes to charge different prices for different songs, The Post has learned.

Negotiations between Apple and the four major music companies — whose iTunes deals all expire in the next two months — have reached a crucial point as several record executives now say they are unlikely to convince Jobs to allow variable pricing, sources said.

This marks a change of tune for the record industry, as late last year several executives said they believed variable pricing — something the music companies have been pushing for — was imminent.

Universal Music, Warner Music (WMG), SonyBMG and EMI North America are all in various stages of renegotiating their deals.

The companies all charge different wholesale prices — roughly between 60 cents and 80 cents a track — but within each company the prices are the same.

Now they have said they want variable pricing — the ability to charge less for some tracks and more for others —- something Jobs has resisted because he wants to maintain the standard 99 cents-per-track retail price.

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.

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.

While sources say this is a remote possibility, the fact that it is even mentioned indicates the talks have been anything but amicable.

A more likely scenario is that the existing deals at some of the companies will expire and the two sides will operate without a deal as they seek to reach terms, sources said.

"That would be problematic for Apple because it allows labels on a whim to pull their stuff whenever they want," said one high-level music executive.

The debate has gotten acrimonious at times, with Warner boss Edgar Bronfman Jr. publicly bashing Apple last year, saying, "only one price point is not fair to our artists."

This prompted Jobs to respond by calling the record industry "greedy."

Still, at that time, some execs expressed publicly that they believed variable pricing was on the horizon.

David Munns, head of EMI, said in a published report in November, "I have no doubt we will see flexible pricing within the next few months."

One high-level music industry executive, who believes the record industry will ultimately abandon its push for variable pricing, blamed the labels for not standing up to Jobs.

"Where in life does the retailer set the price of the content?" said this person.

Releasing its earnings Wednesday, Apple posted a 41 percent rise in quarterly profit, beating Wall Street targets, Reuters reported. Sales of the iPod topped 8.5 million in the quarter, up 61 percent from a year ago.

[Universal Music Group is a division of Vivendi Universal (V). Sony BMG is a joint venture of Sony Corp. (SNE) and Bertelsmann.]