Last night the Wall Street Journal posted an article that said Universal Music Group will not renew its contract with iTunes. Instead of a long-term deal, UMG will have an "at will" agreement with iTunes, kind of like a month-to-month lease. The expectation is that UMG will work on a short-term contract with iTunes and will not pull its catalog. The WSJ's Ethan Smith and Nick Wingfield theorized that UMG could give UMG "more flexibility in its dealings with competitors to iTunes."

The New York Times' Jeff Leeds has an article similar take on the hold out. "By refusing to enter a long-term deal, Universal may continue to press for more favorable terms from Apple," and added the theory that UMG could "explore deals to sell its catalog exclusively through other channels." Another impetus for hard-line tactics is Unless UMG is going to drop DRM and sell its catalog through Amazon.com's upcoming download store or eMusic, any deal with an iTunes competitor would lock out the most prized group of digital consumers in the country: iPod owners.

Labels would like Apple to license its FairPlay technology so other download stores will be iPod-compatible. But we've seen Apple's opinion on how labels and competitors can become compatible with the iPod. Steve Jobs' solution would be for UMG to drop DRM, a strategy I doubt UMG will adopt in the near term.