Apple makes money selling high-margin complements to piracy, not competing with it. iTunes is a low-margin (to Apple) strategic incentive to convince labels not to look so closely at how many billions of dollars Apple makes drizzling the magic margin-increasing white paint on top of commodity hard drives sold, primarily, to pirates.
I read that iTunes was originally launched as a ploy to move hardware and then it turned into a major profit center for Apple, albeit not one they are eager to advertise.
"iTunes is a low-margin (to Apple) strategic incentive to convince labels not to look so closely at how many billions of dollars Apple makes drizzling the magic margin-increasing white paint on top of commodity hard drives sold, primarily, to pirates."
I don't think that most iPod and iPhone purchasers and consumers are pirates. Did I misread you?