Couple of questions about this quote. I'm not sure how old you are, but I've bought music on three different physical media types. Vinyl, cassette, and CD. Each time I wanted that music in a different format, I either had to figure out a way to transcode from one to the other, or I bought the record again in the new format I know needed to use. The comment, "I'm not going to pay apple again for songs I've already purchased or new songs I purchase on the OUT DATED CD platform". Since you're buying CD's, you can't be paying Apple AGAIN for anything, Apple doesn't sell CD's so therefore you never paid Apple for any of that in the first place. I couldn't bring an LP I bought at Peaches and ask Tower to give me the CD. Also, you are openly saying you're well aware that you're buying an outdated format that Apple does not sell or make any money from, and therefore are forced to use iTunes, which is the same as buying only cassette tapes today for a car that only has a CD player, and somehow concluding this is your car manufacturers fault. In fact, your car company is going to tell you that you need to buy the CD or handle the format shift on your own time and send you on your way, not make something that can help you move over to the new format.
As to paying Apple to back up, a) music not purchased from iTunes is not backed up, its against the licensing terms offered by the RIAA, so no one from apple is asking for your money to back up something that cannot legally be back up through iCloud, since again, you chose to purchase this from someone other than apple. So while you paid the RIAA for that song, you haven't paid apple a dime, and they have no obligation to backup your data for you for free. Not sure what you do for a living, but I doubt you do it for free. And b), you said yourself the songs are on the drive. Under what circumstance would you pay apple to backup files you already have saved on another storage device?
Finally, as someone who has an approx 26,000 song library, a lot of it ripped from LP or alternate mixes I've done over the years etc, they have exactly the service for people like us. iTunes Match is designed for exactly your use case. They have freed the Iphone from iTunes. But server space and bandwidth isn't free, so they charge $25 a year for it. I know I'll spend more than that re-buying those records if I were to say have a flood or house fire, so I'd pay $25 a year for the backup features alone, ignoring its other advantages. I suppose what was meant was "free the Iphone from depending on iTunes (which will cost Apple money in engineering time, licensing, storage, and bandwidth), and do it for free".
Transferring formats cost time and money. Apple has made both options available to you: continue using iTunes at no cost to you but you've got to do your due diligence, or for a small fee we will backup and re license music that YOU BOUGHT FROM SOMEONE ELSE. Apples not hustling you for money for "backups" or for music you already purchased, you seem to be expecting them to do something that costs them money, for free, when they've engineered two different ways to do exactly that, one of which is totally free.
I don't often jump into these discussions, but the attitudes expressed in this post are absurd. Columbia house didn't come upgrade all my cassettes to CD for me, and I'm still transferring LP's in real time from phonograph to USB. Either do your due diligence, or use the affordable service that exists to help you with exactly that. Don't act like apple has you by the balls.