Well, this discussion is long and old. We'd all rather live in a simpler world where DRM would never matter, everyone pays the money for the music and video licenses without being asked for it - alas we don't. Apple had to make some rules in order to get the big five companies on board for music, and compared to other services around, Apple's is perfectly alright. As for video: It seems to me it's _harder_ for them to get movie content on the iTunes Store, so they surely couldn't have more loose rules about the movies.
I think that "stupip protection policy" makes sense to the companies - and the numbers tell us that people don't really bother that much. They actually _use_ the service and come back for more.