Universal Music Group, the world's largest record company, has refused to renew a long-term contract with Apple to sell music downloads through its iTunes store, paving the way for exclusive deals with competitors, according to reports.

Universal has decided not to renew a two-year agreement to sell the music and videos by artists such as U2 and 50 Cent via iTunes, and will instead sell content on the site on a month-by-month basis, leaving open the option to do exlusive deals with other services, an industry source said.

The decision does not mean that Universal's vast catalogue of arists — which also includes Eminem and Sting — will be removed from the iTunes store any time soon, but suggests that the label is searching for greater flexibility in the way that it sells its content online, potentially weakening Apple's dominant position in the downloadable music market.

Apple holds a 70 per cent share in the music download market in the US, and is the third-largest retailer of music overall in the US, behind Wal-Mart and Best Buy.

Universal previously had a two-year agreement to provide content to Apple's iTunes site, which was extended by 12 months last summer, but since it expired last month, the deal has not been renewed, the source said.

Neither Apple nor Universal was immediately available for comment.

Rebecca Jennings, an analyst at Forrester, said: "This is a bit of gamesmanship on Universal's part. Apple can't afford to have to turn around to its customers and say it no longer offers Universal's catalogue, and Universal is hoping is that this may prompt Apple to renegotiate their revenue split."

"Apple's monopoly in the music download market has come to be a source of unease for the record industry in the past couple of years."

Since the iTunes service was launched for 4 years ago, Apple has been dispute with the record labels over issues such as pricing - Apple insists that all tracks sell for 79p (99c in the US), and the inability of tracks downloaded via iTunes to be played on devices other than the iPod.

Record labels have wanted to introduce variable pricing for their music, and Universal in particular has shown itself willing to explore different models, agreeing to make its entire catalogue available for free on Spiralfrog, an advertising-supported service which was due to launch in December.

In April, Apple announced a deal with EMI to sell tracks without digital rights management (DRM) protection - allowing them to be played on other devices - for a higher price of 99p. So far the other labels have failed to follow suit.

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