Independent bands out of tune with 'world's biggest jukebox'

It was meant to be a triumph for Apple, the grand launch of the computer giant's push into the online music business in Europe.

It was meant to be a triumph for Apple, the grand launch of the computer giant's push into the online music business in Europe.

Apple's chief executive, Steve Jobs, flew into London to launch the new iTunes store at a press conference yesterday, backed by the American singer Alicia Keys.

But the high-profile launch was overshadowed by a David and Goliath battle in the background between independent record labels and the computer giant which will mean that some of the biggest stars of modern music are absent from the project.

At stake is the future of what could become the dominant mode of delivery for music in the future - a service that Apple is calling "the biggest jukebox in the world".

Thousands of Britons have bought sleek new iPods, the fashionable hand-held digital players which can store thousands of songs in their memory. But until now there has been no way of legally downloading tracks from the internet to put on the players. Instead iPod users have had to rely on music pirates on the Web or transfer their music collections from CD - a cumbersome and time-consuming process.

The launch of the iTunes store was meant to change all that. Operating in Britain, France and Germany, the service will sell 700,000 tracks for 79p each, with whole albums retailing for £7.99. Mr Jobs, Apple's visionary chief executive, predicted that in future all music would be delivered online. "The internet was built to deliver music. But the first people to discover that were the pirates," he said.

But the best-known independent artists and labels, such as So Solid Crew, Badly Drawn Boy and Craig David, have mounted a boycott. Basement Jaxx, the White Stripes and Franz Ferdinand will also be missing from the online store.

The labels said that the licensing terms gave Apple too much power to raise prices in the future without recompense.

The move is a blow to Apple because independent artists account for about a quarter of music sales in Britain.

A spokesman for the record label trade body the Association of Independent Music said that Apple was trying to impose unfair terms on small labels. Sources said the company was paying the big record labels far more than the independent labels.

Although a small player in the computer market, Apple's new online store has been a success in the United States, having sold 85 million tracks since its launch in April 2003. The revenues represent nearly 2 per cent of the entire US record market - a significant chunk in just a year of existence.

In Britain, Apple will sell individual tracks provided by the five major record labels without a subscription for 79p from the UK site, or €0.99 from the Continental sites, undercutting most European download sites, which generally charge 99p per track.

The arrival of the European site is expected to draw buyers who have iPods and fast internet connections: once a track is bought with a single click, it downloads immediately to the computer, and can then be transferred automatically to an iPod. Worldwide, Apple has sold more than three million iPods since their launch in 2001. Britons have bought more than 100,000, and yesterday the retailer John Lewis, which has sold 11,000 since February this year, forecast that the iTunes launch would boost iPod sales by 40 per cent.

Mr Jobs said that pirated music was hard to find in an easily accessible form. "It takes about 15 minutes to find the right song and get a good working copy on the pirate networks," he said. "And what's more, it's stealing." The iTunes Music Store, which is accessed through the company's iTunes software, on Windows or Apple computers, offered fast, legal downloads. "And it's not stealing, it's good karma," he added.

Martin Mills, chairman of Beggars Group and the Association of Independent Music Labels, said: "They're launching with a bullishly low price in the UK, but prices do tend to edge up over time. They're trying to lock us into long-term deals, but their terms had a fixed price for the life of the contract." The labels want to up the payment they receive if Apple raises its prices. They believe the bigger labels already have such "break points" in their contracts.

Mr Mills is still eager to do a deal - as was Mr Jobs yesterday. "We have signed dozens of independent labels, and we're happy to sign more," said Mr Jobs. Mr Mills said that whether the site succeeded or failed "in a few months we will need them, and they will need us".

The big stand-off has begun.