I call "Bullshit"

Apple Threatens iTunes Shutdown over Royalty Dispute

I believe this is simply a case of Jobs trying to throw his weight around for absolutely no reason. And such a release from Apple does not make sense. Not because it sounds stupid, but because they cannot afford to do such a thing. Not that Apple is making a ton of money from iTunes. No sir, they claim to be almost losing money in the store. And if the royalties are increased they say they surely will lose money on every song, because they do not wish to increase the 99 cents a song to $1.05 a song.
But there is a bigger story here and that is Apple has for the last 4-5 years been building an ecosystem around iTunes. iPod, iPhone are both completely reliant on the iTunes. Well that's not completely true. They can be run on any other programs also, but just the simplicity of using iTunes for music and other media transfer makes it important enough for Apple to have in their stable.
And if they plan to continue expanding into media and entertainment offerings, like Apple TV and Time Capsule, then they definately need iTunes to be at the center of their Household Entertainment hub. So I call "Bullshit" or "Bluff" depending where in the world you are.