The biggest threat to a stand alone music player is from mobile phones and portable machines from Nintendo, Playstation and Xbox. If people are carrying one of these that plays enough music then they will not need to carry a separate music device. Following this I think the iPod market will be split in two, at the lower end people who want something smaller than a phone or gameboy will buy something like the shuffle, at the other end some people, and I probably include myself, will need something with more storage and will buy the appropriate size of iPod.
I doubt Apple will want to be absent from this middle tier, and it is easier to build a mobile from scratch than to enter the games market, unless the occasionally rumored link with Nintendo arises. So I expect Apple to create a mobile phone in the next 2-3 years. If in ten years every mobile phone has 1TB of storage then I suspect large stand alone devices will fade away, if these phones are the size of a shuffle or smaller then they too will disappear.
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