1. It has come a long way. iTunes really was a horrible piece of shit software for many years. It is much much much better now.
2. There isn't any viable alternatives. I don't care what people say, I've tried them all.
IMO there's two bigger issues that really prevent anyone from competing and improving the status quo:
a. You need to be friends with the music industry to be in this field, and to retain this friendship there's a lot of things you just can't do. Imagine if something like these flash widgets that you could embed in your website to stream your favorite playlists could still exist.
b. The Apple ecosystem is preventing a lot of people (I believe a majority of phones are iPhones in the US) from moving to competitors and improve competition.