Many companies have long struggled to deal with the DRM restrictions on iTunes music. However, the music labels are now struggling with their own reaction to the Apple-EMI agreement, according to Business Week on Tuesday.

Small companies and Apple’s music player competitors have suffered to deal with the exclusivity of the iTunes and iPod DRM. It hasn’t gone unnoticed by regulators, so hours before the European Commission was planning to launch an antitrust probe against Apple, the Apple deal was struck with EMI.

Now, the question is, independent of Apple’s preemptive move, whether the other labels will be forced to follow suit.

"Warner Music Group CEO Edgar Bronfman Jr., who has over the years criticized Apple’s firm stance on pricing, is said to be firmly against dropping DRM anytime soon. One major-label executive who asked not to be named told BusinessWeek.com that he believes Apple’s motivation has little to do with compatibility and is more about selling iPods and fighting off the complaints by European regulators," the BW authors wrote. "So what does he do to shake off regulators in Europe? He goes after the weakest, most desperate music company to help him promote DRM-free."

Other labels, like Sony/BMG, have been testing unprotected MP3s, but both Sony and Universal have been discouraged by test results.

While some of the labels have their concerns, Bob Kohn, CEO of RoyaltyShare, company that processes royalty payments to musicians said the Apple-EMI agreement will "double or triple the size of the digital download business.... I think EMI realized they could sell a lot of their back catalog by doing this and I think they’re right."

In addition, companies like Real Networks, Rhapsody, Napster, and Yahoo now have lot to gain by seeking similar arrangements from the labels -- which now have much to ponder.

In the meantime, Apple has little to worry about with iPods selling at 50% profit margins.