Is there even still a market for such devices? While $200 dollars may be a lot less than an unlocked iPhone, its certainly not cheap. Plus you can get an iPhone 6 at that price if you are willing to get into a contract.
Kids can't get into contracts. People with bad credit can't get into phone contracts. Sure lots of parents buy their kids smartphones now but a lot can't afford to do that. I still think there's a big market for this. Plus developers - much cheaper to buy a lot of these for a team than iPhone's.
I'm tempted to sneer at iPods too, but it's actually a pretty good choice for the gym. If you're worried about your $800 iPhone getting crushed, an iPod touch will record your lifts just as well; or an iPod Shuffle will clip on to your shirt for a long run through a bad neighborhood.
Also for kids where parents don't want to buy expensive contracts. Or even frugal adults who can just make all their calls through Hangouts/Skype and don't need a cell plan.
Outside the US the costs of wireless contracts are much more obvious and $200 sound very different than $700. I could see parents giving one of these to their kids as a Christmas gift.
The amount of engineering to create such a device is probably minimal, even if the existing market is small. I know people with Android phones who still use an iPod--partly because they have eclectic music tastes. They do to use streaming audio services, but its not the only way they consume music.
