"You are upsetting the fan that went out and purchased the record." I particularly like how Sony BMG's iPod FAQ entry blames Apple for users being unable to transfer music published by Sony BMG to their iPods. Hrm. CDs not published by Sony BMG with their DRM scheme transfer just fine to iPods...Nice spin-doctoring. Two points and a big foam finger for your finger-pointing.
I recently ranted privately to a few of my friends about a similar DRM technology: PVP-OPM. Again, the truly tech-savvy will circumvent this DRM method, and the only ones inconvenienced will be the casual users, like your Mom and Dad. Though this time it's owners of $4,000 televisions instead of $250 portable music devices who are going to be told that they must "upgrade."
Last I checked, "alienate your consumer" was not a recommended business strategy. Yes, piracy causes lost revenue, but at some point you have to recognize that a certain level of loss is always going to occur. With this in mind, you can chose a wise trade-off point between security and inconvenience. The credit card companies realize this, and budget for fraud (though I believe they can improve their security greatly without inconveniencing users). The media companies are going way past the magic threshold.