Andrew O’Hara, AppleInsider, digs through the potential market for the new iPod touch. The biggest bit of this that clicked for me:

Apple also touts the upcoming Apple Arcade which will allow access to several exclusive games for a monthly fee. The new iPod touch is a very clear, inexpensive delivery device for that service.

This seems a solid strategy: Release a relatively low cost device, ready made for parents with kids and a long road trip ahead. A subscription to Apple Arcade is a perfect complement to the new iPod touch.