Europe's disparate musicians royalty-collection agencies have spurned record labels' attempt to set up a system across the continent,

The labels reportedly want Europe's royalty-collection agencies to negotiate a flat rate to cover legal music downloads, CD sales and DVD sales. The royalty groups – which collect money on behalf of the artists – want more time to negotiate the rate.

Music companies had offered a flat 8 per cent royalty for music in all Europe's territories in all formats. Industry observers report that this offer is potentially a smaller cut of the royalty pie than many artists receive today, where rates can be as high as 12 per cent and beyond.

The Times reports that existing royalty rates stand at 9 per cent for CDs in Europe (8.5 per cent in the UK) and 6 per cent for DVDs.

A source told The Times: "Throughout all negotiations between record companies and the collection societies it has always been the artists that backed down and took a lower rate.There is always a situation where you decide not to let that happen again.”

The move means digital music distributors must negotiate royalty rates on a territory-by-territory basis, suggesting that Apple's iTunes Music Store announcement next week will be of a gradual territory-by-territory roll-out across Europe.