Sorry to dig up an old thread, but it's become extremely relevant as of late...
http://news.com.com/Apple+fights+RealNetworks+hacker+tactics/2100-1027_3-5490604.html
It seems that Apple quietly disabled Real-bought AAC files (Harmony files, if I'm not mistaken) in a firmware update to the new iPod photo. I was perusing the macnn.com forums, reading reader's comments, and one reader was a little preturbed by Apple's move and said something to the effect of, "It should be the user's choice what music goes on the iPod, as, afterall, it is the user's iPod."
I thought that was a little off... kind of like saying, "It's my VCR, I should be able to choose to play DVDs on it." The whole idea behind Harmony and the iTMS and the formats supported on the iPod is just that:
format. You buy a VCR knowing that you only get to play VHS tapes in it. You purchase a DVD player knowing that you can't stick a VHS tape into it.
You buy an iPod knowing that you're limited to unprotected file formats (with the exception of WMA) and music purchased from the iTMS. You don't buy an iPod with the expectations of playing DVDs or audio cassettes on it, nor do you purchase an iPod with the hopes of using music from WalMart's music store, or Real's music store. Those who do probably aren't as experienced with the whole online music store phenomenon -- they may be mildly disappointed that they can't use WalMart/Real/Sam's/Microsoft music stores, but the overall happiness with the iPod and the iTMS will negate that.
I think Real struck at the wrong time. There isn't a big uprising of dissatisfied iPod owners demanding that the choice of music they can use be widened to other online music stores. I'm sure there are a few out there -- probably as many as those who want their old VCRs to play DVDs. It hasn't become an epidemic. Sales of iPods are growing, not slipping. If this were 3 years in the future and the movement had enough backing, Real might have gotten some support, but for now, the Harmony project died because of lack of interest, I think -- or lack of usefulness.