...the best-known independent artists and labels, such as So Solid Crew, Badly Drawn Boy and Craig David, have mounted a boycott. Basement Jaxx, the White Stripes and Franz Ferdinand will also be missing from the online store.
The labels said that the licensing terms gave Apple too much power to raise prices in the future without recompense.
The move is a blow to Apple because independent artists account for about a quarter of music sales in Britain.
A spokesman for the record label trade body the Association of Independent Music said that Apple was trying to impose unfair terms on small labels. Sources said the company was paying the big record labels far more than the independent labels.
Also, from the BBC Row over iTunes deal for indies
Russell Cook, label manager of another UK download service, Wippit, said independent music enjoyed a unique status in the UK.
"The UK and European markets are very different from the US. More than 25% of music sold here is independent.
"In essence, the UK has six major labels, not five and the indie segment is one of the biggest."
Mark Mulligan, a media analyst for Jupiter Research, said the lack of big independent music on iTunes was not a "body blow" for the service.
But he added: "It is unfortunate not to have strong independent music on board, especially in countries like France and Germany where domestic repertoire is so crucial.
"It's a problem that will need to be addressed by Apple."