because even if the general purpose device costs more, buying specialized ones that do the jobs of the general purpose one usually will end up being more money spent in the long run. $400 tablet, that replaces a $150 iPod, $150 eReader, $130 portable game system, etc.
So what is cheaper for those who don't have a use for a portable music player and don't game at all? And in your scenario, the iPod and the portable gaming system are still available... just not chosen. Do you really think iPods, Gameboys and their ilk are going to go the way of the Dodo, too? I don't see any indication of that at all.
It's not that I don't think your argument isn't sound, but rather that it's not all encompassing. There's mainstream and there's niche. Both groups have always been taken care of since marketing became a word.