What Gruber misses is that the iPod touch is a freebie Apple gets thanks to the virtuous cycles they've created elsewhere in their business. Apple has both an

What Gruber misses is that the iPod touch is a freebie Apple gets thanks to the virtuous cycles they've created elsewhere in their business. Apple has both an outstanding content channel and an instant payment mechanism. Selling content is easy. Which means they get great content to sell: music, movies, TV, and now, applications. There's as much demand for content as for hardware in Apple land. Apple makes a killing on the hardware, gives most of the content revenue to partners, and everyone is happy. So you slip in an iPod touch, and boom: more content consumption, more hardware sold. Without compelling content, who needs a non-phone Android device? Without an amazing instant payment mechanism, who wants to make great content for Android?