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Five hundred million. Half a billion. Or, if you’re the numerical sort, 500,000,000.

That’s the number of digital songs that Apple Computer has sold through it’s iTunes Music Store in a little over two years. Considering that such a gigantic number represents a completely legal music downloading system where record labels get about 70 cents from every 99-cent download, you would think that those same labels would be happy with their estimated $350,000,000 in revenue.

Don’t mess with a good thing, right? Sure…until you remember that we’re talking about the record industry, who miss few opportunities to make themselves look greedy and incompetent. As the New York Times reported in a recent article, several big players in the music industry are starting to grumble about Apple’s success and want—what else?—more money:

Two and a half years after the music business lined up behind the chief executive of Apple, Steven P. Jobs, and hailed him and his iTunes music service for breathing life into music sales, the industry’s allegiance to Mr. Jobs has eroded sharply.

Mr. Jobs is now girding for a showdown with at least two of the four major record companies over the price of songs on the iTunes service.

If he loses, the one-price model that iTunes has adopted - 99 cents to download any song - could be replaced with a more complex structure that prices songs by popularity. A hot new single, for example, could sell for $1.49, while a golden oldie could go for substantially less than 99 cents.

We’ve talked about this subject before, but with time almost up on Apple’s current agreements with the major label monoliths, it looks like a showdown may be imminent between the world’s most successful online music store and the labels that provide the content. There seems to be two major angles to this:

1) Profit — While no one expects the major labels to become charities, raising the price of an iTunes download by 50% is little more than a money grab. There is no difference on a technical level between a $.99 file and a $1.49 one; the extra money wouldn’t go toward increased sound quality (all digital downloads are noticeably inferior to CDs on this level) or server space or any of Apple’s technical work. Instead, it would go directly to the label that was already making $.70 on a product that required no packaging, warehousing, shipping or other associated costs. To put this in perspective, the wholesale cost of a typical CD is between $9 and $12 with all of those expenses added in. The labels might lose a buck or two with an iTunes album sale versus a store CD sale, but they don’t have to pay the extra expenses, and they also benefit from iTunes’ appeal to impulse buyers—the very concept of online music sales allows consumers to buy music a la carte in a way that is impossible to replicate in a retail environment. If the price of popular songs went to $1.49, would consumers think twice before hitting the “buy” button? Many would, especially when they aren’t getting anything extra for their money.

2) Jealousy and control — It’s no secret that the major labels had to be dragged kicking and screaming into the digital music market. Their early attempts at selling mp3s online were half-hearted and pretty much worthless, and it took Apple to make the concept easy-to-use and, most importantly, successful. However, it’s pretty well known that Apple’s major stake in iTunes is not the music store itself but to increase sales of the popular (and profitable) iPods. Of course, the music industry doesn’t get a percentage from that particular cash cow, which leads to moronic quotations like this:

A sore point for some music executives is the fact that Apple generates much more money selling iPod players than it does as a digital music retailer, leading to complaints that Mr. Jobs is profiting more from tracks downloaded to fill the 21 million iPods sold so far than are the labels that produced the recordings.

Andrew Lack, the chief executive of Sony BMG, discussed the state of the overall digital market at a media and technology conference three months ago and said that Mr. Jobs “has got two revenue streams: one from our music and one from the sale of his iPods.”

“I’ve got one revenue stream,” Mr. Lack said, joking that it would require a medical professional to locate. “It’s not pretty.”

While there are at least two dozen reasons why the music industry’s tepid “one revenue stream” is their own damn fault, for Lack (or any other industry suit) to whine about Apple’s iPod profits is kind of like a movie studio complaining that they didn’t receive a cut from a cinema’s popcorn sales. Last I checked, no one in the music industry (other than other retailers) complained that Best Buy and other “big box” stores were selling cds at below cost to drive sales of other, more expensive products. But despite the fact that they too profit from the success of iTunes (and, by extension, the iPod), some music executives seem bitter at the extent of Apple’s success and their lack of direct control over it.

This might help to explain another of the music industry’s problems with Apple—namely, that the iPod and iTunes software work only with one another, and not with competing players or music services.

Still, to some executives, that practice makes Mr. Jobs appear more concerned with maintaining market dominance for his high-margin iPods than with allowing a more open digital market. All of the music companies, to one degree or another, have been urging Mr. Jobs to abandon the strategy, according to executives involved in the talks.

Even though Apple is the recognized leader in this field, it doesn’t hold anything close to a monopoly. Numerous manufacturers sell digital media players, and there are at least a half-dozen competing services for consumers to choose from, so the labels get paid no matter what format the digital file is encoded with. The music industry has profited under Apple’s leadership in a way that was unthinkable two years ago, and in a way that every other competitor has failed to equal. But that hasn’t stopped the second-guessing about Apple’s decisions and motives. Is it any surprise that Sony, who has its own competing digital music store and media players under the corporate umbrella, is one of the main critics of Apple’s iTunes/iPod stance?

As long as the record companies are making money from every iTunes download, and every download from competing services, why should they care that Steve Jobs wants to maintain the iPod’s “market dominance”? The simple answer is that they want more money and more control over a medium that they weren’t smart enough to figure out the first time around. There’s little evidence that they have learned anything since then.

“As I recall, three years ago these guys were wandering around with their hands out looking for someone to save them,” said Mike McGuire, an analyst at Gartner G2. “It’d be rather silly to try to destabilize him because iTunes is one of the few bright spots in the industry right now. He’s got something that’s working.”