In Wired’s piece on the making of the iPod:
Knauss noted that there were no demands to add FairPlay, Apple’s copy-protection technology, which was appended to the second-generation iPod to coincide with the introduction of the iTunes music store.
“There was no discussion of (digital rights management),” Knauss said. “Their belief was DRM would hurt sales when they rolled out the music store. They specifically wanted no DRM in the original iPod.”
Interesting. This sounds likely, and would mean that DRM in the iTunes store resulted from the record labels, and not Apple.