Update: ElectricPig is reporting on 10/13 that an Apple spokesperson said the LP format will be opened up for all, indies and majors alike.

There's word from an indie record-label that iTunes LPs are not for the indies. Introduced at Apple's "It's Only Rock and Roll" event in September, the iTunes LP format adds "bigger than a matchbook" album art, song lyrics, video clips, and other extra content to albums sold through the iTunes store.

Brian McKinney of Chicago-based label Chocolate Lab Records saw some promise in the new format and started looking into the idea of producing for iTunes LPs himself. But the truly small labels may have a hard time getting in. McKinney spoke to the digital distribution manager at his label's distributor, who reportedly told him that Apple charges a $10,000 production fee for iTunes LPs. $10,000 may be less than the heads of Warner Music Group, Sony BMG, Universal Music Group, and EMI spend on breakfast, but could be cost prohibitive for the little label that could (if it had $10,000 handy for each of its acts).

It's not just the cost that prohibits the little labels. According to McKinney, it's also Apple. McKinney says his dude in distribution was told "that LPs aren't being offered to indies and that there are only about 12 LPs being offered right now."

"Foul, foul, filth and foul," cries Cult of Mac's Pete Mortensen. Like a financial analyst moving a stock from "buy" to "sell," Mortensen says iTunes LP has gone from "the first digital album good enough to criticize," to "the first major content misstep in the history of the iTunes Store." Assuming that Chocolate Lab's distributor info is on the up-and-up, Mortensen thinks iTunes LP is "less a new format for music than it is a new form of paid advertising on the iTunes store."

Digital music purchases have been dominating the market for some time now as physical CD purchases continue to fall. For Apple, a significant lead over the rest of the music proprietor world is not enough: according to the Financial Times, the company is now working together with the four largest record labels in the business to add new features to accompany digital music purchases through its iTunes Store in hopes of stimulating full album purchases.

[The FT also reports, without hedging, that Apple's "media pad" tablet device will ship in time for the holiday shopping season. According to the paper, the long-rumored iPad is intended as a full-featured portable computer and video & music player, like an oversized iPod touch, including wireless data connectivity but no built-in phone functions.]

Apple has formed an alliance with EMI, Sony Music, Universal Music Group, and Warner Music to bundle whole albums with perks like interactive booklets, digital sleeve notes, and video clips. By doing so, Apple hopes to increase sales of the albums over single track purchases, a sales model that has been immensely popular in the advent of digital music.

The project, codenamed "Cocktail," is intended to recreate the former experience of album-purchasing, where you could browse the liner notes, follow lyrics, and look at the album artwork as the music played. Executives have said that users will even be able to play music straight from the proposed interactive booklets without having to use iTunes. Of course, the main motivation for increasing album sales is to increase profits, as albums have a higher margin than individual songs.

This change is one that should have taken place a long time ago- having to search for lyrics on shady, ad-ridden websites should already be a fading, shudder-inducing memory (though liner notes have been available on some albums, a change across the board has yet to take place). As items like liner notes and photos are possibly the last benefit that physical CDs can offer over digital purchases, this may turn out to be a very serious blow to the CD market. The iTunes Store album add-ons are set to roll out in September.