[This post started off as a comment on my friend's blog, but it got so long, I just decided to make it a post here rather than a long-ass comment over there]
I too have wondered about Jobs' DRM thoughts; mainly why he wrote it other than to seem like he's leading the charge for a DRM-less world, rather than the biggest purveyor of DRMed content (music, video, games). In a way, it's good that Jobs states the obvious since it seems like if anyone can make this happen, it would be him. The record companies have clearly been blind and/or wrong since digital music began. They've dug themselves a hole which is hard to get out of.
Here's an interesting point to note: 90%+ of music sold is DRM-free. Just about every CD we buy has no form of DRM. And CDs continue to be sold left and right. Of course that model is on its way out, but I think it's silly of any exec to pretend that the music biz would collapse without DRM. In fact, it's quite healthy. Even when people can easily download pirated music.
Spin Mag has a short piece on what record companies should do to keep the industry going. Some of them are obvious like letting us decide which player & software app to use and not worry about interchangeability (I still worry about this simply because I've got 3 different computers where I might want to play one of my purchased iTunes songs!) Unfortunately, the piece isn't online, but it's just such obvious stuff.
On that note, it's just idiotic for Jobs to pretend like he's onto something here and that he's trying to convince the record companies of this. We've known this for a long time and nobody should feign ignorance here.
On the note about people buying more iPods vs perhaps buying phone/player combos, I can't help but think of the walkman. Sony revolutionized the usage of music. The iPod and other high capacity MP3 players evolved this by allowing up to carry most (or all) of our collections in our pocket. But what happened with the walkman? Why didn't people keep buying them left and right?
Well, partially, I'm sure because walkmans seeemed to work FOREVER. I had one for 5+ yrs!. But more importantly, the newness just wore off and people realized that they really didn't need a walkman every moment of their lives. They were happy enough with little radios to use while at the gym or [ARGH!] a moment of silence!
Similarly, I think people are beginning to realize that they don't really need every song at every moment of every day. What's more important is having something conveniently avaiable. So when the old iPod dies, rather than immediately replacing it with another iPod, a lot of people are more logical with their choice and buy something that works, but doesn't necessarily have the panache or storage of an iPod. Sure, it's nice to have the coolness, but if $250 can be spent to get BOTH a phone and a player, why not? It may not be perfect, but it works.
Of course, this all comes from someone who has had a quite capable PDA phone that can play music but still went out and bought his first iPod a few months ago. :)