It's an interesting scenario, as several people have pointed out: In one sense they have supreme leverage in that they have power over the API etc. At the same time, they have a reputation/brand to protect (damage to which could cost a whole lot more than $250). They've clearly come on strong, adding the threat of discontinuing your access to the API as a pressure cooker.

Ignoring the artificial pressure that they've added, what real incentive is there to accept this deal straight off? $250 isn't a game-changer -- Zillow knows that too. Fight for what you think it's worth.