NBC Universal has decided not to renew its contract to sell television shows on iTunes, becoming the second major media company to challenge Apple Inc's dominance in digital entertainment.

Apple said on Friday that NBC had demanded to more than double the wholesale rate for each show, which Apple said would have forced its iTunes online store to raise what it charged consumers to $4.99 per TV show episode from $1.99.

We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase, Eddy Cue, Apple's vice president of iTunes, said in a statement.

Apple has decided not to offer shows for download from NBC's upcoming season beginning in September, including popular series such as Heroes.

A spokeswoman for NBC Universal confirmed it will not renew the iTunes contract and declined to elaborate.

NBC Universal, which is controlled by General Electric Co, is the No. 1 supplier of digital video to iTunes, accounting for about 40 percent of downloads.

Its decision is the latest example of tension between Apple, the owner of the most popular storefront for digital entertainment online, and media companies seeking more control over pricing.

Vivendi's Universal Music Group declined to sign a long-term deal with iTunes, leaving open the possibility for exclusive deals with other services, a source told Reuters in July.

NBC Universal notified Apple of its decision late on Thursday, said a source familiar with the matter on Friday, confirming a New York Times report.

The media conglomerate is also pushing for better piracy controls, such as the ability to prevent pirated material from being uploaded to Apple's popular iPod, the source said, adding that discussions between the two companies are expected to continue through December when the contract ends.

Apple said NBC, which provided three of its 10 best-selling shows last season, accounted for 30 percent of sales of iTunes TV shows.

Apple is also facing a slew of iTunes rivals, including Amazon.com, which is expected to launch its music service in September.

(Additional reporting by Lewis Krauskopf)

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