It was an integrated system, not an open one.
Definitely is today. It's difficult to copy mp3 files directly to an iPhone and play them. Even from a Mac, but even more so from a PC or Linux.
I bet less than 1% of iPhone and iPad users do that. They mostly pay for streaming. (Again, not saying that's better, but just that the general public doesn't do Napster-like file sharing.)
Then you need to recalibrate your certainty assessment. Not only did I do this personally with both music and videos, it is incredibly easy to find documentation of the steps. First google result: https://www.alphr.com/add-music-to-ipod-without-itunes/
Apple's ipod sales absolutely benefited significantly from music piracy. Especially early on when nobody hard large itunes collections yet and music torrents were much more common.
The genius of the ipod / itunes play is that they got to do both. They benefited from the demand from people with non-itunes libraries, while also offering a low friction sales platform that was easier than piracy.
I guess I'll just say "meh" -- it doesn't negate the main point, which is that Apple spent a lot of money and time to acquire rights, and they have a music store.
It is gated by iTunes, just not 100%
I know some people side load stuff on devices -- there's no device where that's impossible.
I bought an iPod Mini in '04 that I used for a summer photography course as an external hard drive. An actual external hard drive would have been cheaper, but after my summer trip was over and I no longer needed the additional storage space — hey, I had an iPod Mini! I copied photos onto it from a CF card via USB. It was literally drag and drop. There was no iTunes gating. You're just... wrong here.
The ipod was launched two years before the itunes store. Even after the itunes store launched, you could just still load your other music into itunes if you wanted. All music was sideloaded (i.e transfered directly over USB) onto ipods at this point
You don't seem to know any of this history and are just making things up. I don't think Apple had to pay any money for the right to sell music via the iTunes store. What they did do was add DRM to music sold through the store, at least until they were big enough to renegotiate in 2009.