In 2003, Apple Computer's Steve Jobs walked into the boardrooms of major record labels, showed executives his prototype for iTunes and, for the first time ever, persuaded the music industry to sell music online. Since the iTunes Store opened in April 2003, Apple has sold 500 million songs and come to dominate the online-music marketplace with more than seventy percent of worldwide digital sales. Now, the honeymoon is over. Label executives have begun to question the contracts they signed with Apple, criticizing Jobs over song prices and the proprietary technology that makes iPods incompatible with non-Apple technologies. Here's what's at stake:

Pricing: The biggest issue is Apple's refusal to raise prices to higher than 99 cents per song. Most labels want a more flexible scheme -- something like $1.49 for a new hit and 99 cents or less for older songs. "One price point is not fair to our artists," Warner Music Group chief executive Edgar Bronfman Jr. said recently. "The market ought to be able to decide, not a single retailer." Jobs dismisses the argument, calling the labels "greedy."

Compatibility: Apple's FairPlay copy protection is incompatible with non-Apple products such as Microsoft's Windows Media Player and Napster's song-download service. So if you buy a song on Napster, it won't play on an iPod. At first, labels accepted this arrangement, but now that Apple sells the bulk of downloaded music and seventy-five percent of all digital-music players, some say Apple has an unfair monopoly. In retaliation, Sony BMG and EMI introduced copy-protected CDs that aren't compatible with iPods.

Apple's iTunes contracts with the labels expire next spring, and, at this point, neither side is budging from its demands. "It's a big game of chicken," says Bobby Rosenbloum, attorney for Jimmy Buffett, Sheryl Crow and others. "My bet is Apple will reach terms with the labels."