Universal Music Group, the world’s largest music corporation, has decided to flex its muscles in negotiations with Apple over its annual contract to sell music through the iTunes Store. Instead of a new annual contract, Universal is looking to move to short-term contracts that allow the company to provide music to the iTunes Store "at will," according to the New York Times.

Universal’s move is an attempt to take back some of the control Apple now has over online music distribution and pricing. Apple has been firm on its US$0.99 per song, although it recently added a new $1.29 price point for higher audio quality copy protection-free tracks.

Music labels, however, want to charge more for popular songs in hopes of increasing declining revenues - a move that could push legitimate music purchasers to illegal music sharing networks.

Entertainment lawyer Ken Hertz commented "The record companies now have to figure out how to stimulate competition without alienating Steve Jobs, and they need to do that while Steve Jobs still has an incentive to keep them at the table."

Universal may find, however, that it doesn’t have as much pull as it would like. The iTunes Store is now the number 3 music retailer behind Wal-Mart and Best Buy, and other music labels like Sony have already agreed to new annual contracts.

Pulling the Universal Music library from the iTunes Store is not in either company’s interest, so the two are likely to work out some kind of deal. What that deal will entail, however, remains to be seen since neither company is publicly discussing the negotiations.