That's silly. Making products work with only your products is legal and has been going on for at least 100 years. If you get razors from company X you can't get blades from company Y. Like video games (that Apple mentioned in their argument) that work only in their console, if you get a DVD it won't play in your VCR, your AT&T phone won't work on Verizon, if you get HBO you can't record it without DRM in HD, only certain garbage cans fit into my cabinets trash drawer, etc. It's stupid to expect a company has to make their products universally compatible just because they have the industry-leading product. We have hand sanitizer dispensers and, guess what, they only let you use their packaged liquid. Only an idiot would think companies should be compelled to do otherwise.
And regarding the record companies, it was "use music with your DRM only or no music for you". So the alternative would be NO iPods or downloadable music. You'd be back having to buy a crappy album for a single good song.