Earlier this week we reviewed the Samsung Galaxy Player 5.0, an Android device with the iPod Touch squarely in its crosshairs. It’s not the first, either: Samsung, Archos and innumerable smaller companies have released phone-sized Android devices designed primarily for media and app consumption, just like the Apple device. So far, they’ve failed to make a dent in the low-cost, high-function section of the market.

Part of the reason is that Apple so kicky dominated it when the iPod Touch was released in 2007. That isn’t to say that Apple invented the large-screen media player; Archos had a solid following for its codec-rich media players before, and they still do. But the combination of a low price and access to thousands of apps proved hard to resist, especially for those who didn’t want or couldn’t afford a smartphone’s monthly data plan. In that sense it’s perfect device for kids, who might not be trusted with a phone that costs $500 to replace. To date, the iPod Touch has sold more than 60 million units.

Despite an Android app environment that’s quickly become just as rich as iOS, the Touch is still untouchable in its market space. Android media players have better specifications, more capable software, expandable memory, and until the latest generation, better screens as well. What makes Apple so unbeatable here? Part of it is certainly the phenomenal marketing machine at Cupertino, but that alone has failed to stem the tide of Android on smartphones, and more recently, tablets.

In many ways, Android is a victim of its own success. With entry-level Android phones mostly free on contract, who would want to buy or carry around an extra device? And for someone willing to spend $200-300 on a new iPod who wants an Android alternative, low-priced tablets like the Nook Color and the upcoming Nook Tablet provide a similar experience with a much larger display at a similar price. With the 3-5 inch media player market squeezed from the bottom and the top, there isn’t much room for an in-between gadget like the Galaxy Player.

But does there need to be? For someone budget-conscious who’s committed (or stuck) to the Apple universe, there’s only two avenues to iOS without signing a contract: the $200 iPod Touch, or the $500 iPad. That’s a big gap in price and functionality. Switching to Android opens up your options considerably, mostly in the cheap tablet space. Unless you’ve absolutely got to have a WiFi device that fits in your pocket – like a phone, without the phone – why wouldn’t you go bigger?

And things are only getting better for Android tablets, especially on the low end. Right now if you’ve got a maximum budget of $300 for a tablet, odds are you’re getting Gingerbread, not Honeycomb. But once Ice Cream Sandwich is open sourced, all the cheap inexpensive tablets and in-between devices should start shipping with an interface that’s meant to be used on a 7-10 inch screen. Again, you sacrifice some portability, but in a device that can’t connect to a cellular service without help, does that really matter?

In short, Android tablets aren’t competing with the iPad, at least on the low end. They’re competing with the iPod Touch. And if the pre-orders of the Amazon Kindle Fire are any indication, they represent a serious threat to Apple.

Tablets are naturally good at what the iPod Touch does: simple, cheap consumption of media, web and apps. So far Froyo and Gingerbread tablets have been cut off from official support for the Android market, barring a few high-profile exceptions like the HTC Flyer and the original Galaxy Tab. But with the Amazon Appstore showing up on more devices, not to mention the $199 Amazon Kindle Fire itself, access to apps and media is becoming less and less of a problem. Maybe Google will even relax its requirements and allow more device to carry official Google apps once Ice Cream Sandwich becomes open-source. We’ll see.

Is there a space for small Android media players? Certainly. The problem is that that niche and the mindshare is filled so perfectly by the iPod Touch that manufacturers have a hard time justifying the competition. With Android tablets coming into their own and filling the media player segment, the drive towards creating phone-sized media devices is smaller and smaller. Tablets make great media consumption devices, and cheaper ones will begin to invade the iPod Touch’s market very soon. If on the other hand you’re one of the few Android enthusiasts who’d prefer a WiFi device to a phone on the same form factor, be sure and lets your desires be known – preferably by purchasing one.