It's an ongoing question... I'm sure you remember all those execs at Creative and iRiver and such companies confidently explaining to reporters that the iPod would die as a result of its not including features like FM tuners and voice recorders. iPod competitors with gobs more features are older than the iPod (Archos was making devices that played video in the same generation as the first monochrome 5GB iPod). And yet they're all gone and the iPod lives on.

I'm sure it'll be the case before long that people will be asking themselves to choose a music player based on whether it also plays games and does PDA functions and has a phone built-in and so on. But it's a branding thing more than a pure utility thing:

http://daringfireball.net/2003/10/dells_dud

If Apple put a camera and a phone in an iPod, it wouldn't make it sell better—in fact, I tend to think it would hurt sales, just because it would start to seem like something not aimed at the people currently buying it. Even if they kept the price the same. Kids would stop asking their parents for them. Peer groups would stop regarding it as a must-have accessory. People would be buying it for different reasons—games, phone, camera, PDA—and none of them would be the reason why they're buying iPods now: that they see it as being something FOR them, something engineered to a particular clear-cut need.

iTunes phones are now in their second generation. Essentially, they are iPods with phone capabilities. And we've seen how dismally they're doing. And it's not just because of their limited capacity; it's because they're a muddled concept. They're no longer iconic.

Companies like Microsoft will keep trying to go down this well-worn "Hey, I know—let's make it like an iPod, except with more features! We can't lose!" path that's been trod so many times before... but unless they figure out a way to do so that involves an uncompromisingly iconic brand image, it's not going to go anywhere.