Developers make 4x from iOS apps vs. Android. The vast majority of people choosing* Android don't spend a dime on apps nor services.
Apple's iOS strategy is no different from the Mac's: skim the customers creme, enjoy the high margins and spend more on customer service. You can't beat iOS.
*EDIT: they don't actually "choose": they pick the lowest priced item, and it's not an iPhone.
Let's not forget that often times the salesperson in the cell carrier store chooses it for them. It's no secret that cell carriers would really like for the iPhone to go away if they could make it. Androids make them more money, and give them more control over what apps are forced on the users.