In a move the Times describes “as a boiling over of the long-simmering tensions between Mr. Jobs and the major record labels,” Universal Music Group (UMG) has declined to renew its annual iTunes contract.

The reasons are simple enough: the music industry wants some tracks to cost more than $.99, while Apple likes the one-price-fits-all model and has refused to budge. UMG, a division of Vivendi Universal and the world’s largest label, can still license tracks on a piecemeal basis, but they are now reserving the right to withhold some of its hot tracks in an effort to gain leverage.

UMG will have a hard time winning this standoff. iTunes is the source of nearly all industry-sanctioned digital music downloads; for the labels, it’s approximately the last great hope for saving anything resembling the current business model.

For Apple, however, iTunes is just a vehicle for moving iPods. After all, the ubiquitous toys also play MP3s. UMG needs Apple much more than Apple needs Universal.

Jobs has already made his position clear: if you want to limp out the door, go right ahead.