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Ringtones are a very profitable part of the music business because the price for a short segment of a song is higher than for the full song.

In the US for example says the report, "Apple offers ringtones as a 99-cent upgrade to its regular 99-cent music tracks", however not all tracks can be converted into ringtones and Apple is said to be looking to expand this inventory.

The company is also hoping to "add answer tones, also known as ring-back tones -- songs that a caller hears instead of the "ring ring" sound while waiting for someone to answer. In some cases, these command an even higher wholesale price from the record labels than ringtones do", says toptechnews.com.

In a more interesting development, Apple is trying to convince the music companies to allow it to sell songs from its iTunes Store directly to iPhones using new, faster mobile broadband networks, such a the 3G network in Australia.

However the music labels are arguing that they should be paid more for an over-the-air download than a standard track bought on the Internet, where the wholesale price is around 75 cents.

And as Apple is the dominant player in digital music, it is also growing fast as a mobile phone maker, so from all sides of the negotiating table, the expectations are high, along with the potential profits to be made, considering that Apple has a reach of some 575 million mobile phone users in the six countries in which the iPhone is now sold.