Sort of like how you can't do squat with music/movies on iOS unless it's through iTunes?
The op doesn't mean that iTunes would be used for selling media. Rather it'd be your personal media player for everything like AVI/Mpeg/etc. like VLC is.
I don't know how well iTunes can do this as is, but that's what he's arguing for.
They didn't decide to limit the iPod to 32Kb/s playback to protect sales of their CD players