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But as we know from the iPhone, there are plenty of people out there who aren't overly interested in what features something has or how well suited it is to it's task, so long as it's a shiny Apple product.
There are a large number of people will pay through the nose for a 16GB flash-based iPod and if Apple don't produce a 16GB Nano, a significant number of those people will be prepared to get the Touch instead (not to mention the people who actually specifically want the Touch because it's new, pretty or whatever...).
There are two ways of looking at it.
Firstly, by limiting the capacity of the Nano, Apple are going to lose customers by not catering for their needs. Or, secondly, by not competing with themselves, they can make more money by pushing people to a more expensive product.
The chances are, given the sort of 'wildly loyal' customer-base Apple has that the second way of looking at it is closer to the truth.
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