They have always struck me as an iPhone that does not make calls, or as a miniature iPad. I have no use for such a small media player, particularly for video. I still use one of my old audio-only iPods. My old iPod Nano (the one with a buttons on top) no longer works after the main button got stuck.
I would really like a small music player that can hold a lot of songs and has an easy interface to organize and play groupings of songs from my collection. I don’t think Apple has ever done a good job with an organizing interface. That’s the problem I think they need to solve.