Apple threatened to shutdown iTunes because of a proposed royalty hike for musicians. The Copyright Royalty Board in Washington declined Thursday a request by the National Music Publishers Association to increase royalties from 9 cents to 15 cents on songs purchased from iTunes.

Apple threat was not really believable as the whole iPod eco-system would be harmed by shutting down the iTunes store.
Apple wants to keep the per song price at 99 cents and also did not want to harm their revenue by eating the higher royalty.
Based on estimates of PricewaterhouseCoopers Apple only makes 10 cents per song profit. The largest part of estimated 70 cents goes to the record company. The 9 cents for the musicians comes from the record company's share. I understand Apple staying firm on this, as the record companies have by far the biggest share per song.
More details on CNN.