Consumers are not going to add $1,600 to their budget just to buy a separate display.
A 10 core Intel 5k iMac with 512GB SSD was $2700, or $3200 with the best GPU option - but that came with a measly 8GB of RAM (ridiculous compared to the other specs of that machine) and Apple wanted $600 for the upgrade to 32K. So that's $3300 to $3800. Yes, you could have a couple of hundred off that if you got 3rd party RAM, but that option was always going to go away with Apple Silicon.
A base Mac Studio Max has a significantly faster 10 core CPU, comes with 32GB as standard and costs $2000. Add a Studio Display and that comes to $3600. Add the full 32 core GPU option and that comes to $3800. Also bear in mind that the Mac Studio has 4 full-fat TB4 ports, for which you'd previously have had to go for the $5000 iMac Pro.
So, really, the price of a Mac Studio plus Studio Display is pretty much in the same ballpark as a
comparable (even allowing for a bit of 'progress') Intel 5k iMac, and the 20 core Studio Ultra + display is considerably cheaper than the $7000+ 18 core iMac Pro.
What we've lost is the $1800-$2000 5k iMac options, which were always the best bangs-per-buck that Apple offered (considering the only comparable 5k display sold for $1000-$1200) - but they were never in the same league power-wise as the Mac Studio. You
could get a M2 Mini and Studio display for $2200 and the result would be as capable as a lower-end 5k iMac (personally I'd want a beefier GPU to go with that screen) - still, it's clear that the price there
has gone up - but it hasn't 'added $1600' to the budget.
They’ll buy a $300 non-apple display instead and then spend less money on Apple products.
OTOH Apple can now sell Studio Displays and Pro XDRs to MacBook Pro owners who
previously would have bought 3rd party displays - and there are probably far more MBP users than 'desktop' users out there. I don't like the Studio Display much, but it is pretty well suited to being a MacBook docking station (and Apple have put a lot of effort into squeezing in a big power supply to charge a MBP).
Meanwhile, Plenty of Mini/Studio here seem to be happily buying the Studio display. Then there's probably some people who didn't want a 5k iMac
because they wanted the Pro XDR. Plus, the people most affected by this either (a) haven't done the math (see above) or (b) wanted one of the lower-end 5k iMacs which I strongly suspect must have been one of Apple's lowest-margin products.
...and even if people do buy a 3rd party display,
they'll still have a Mac, still probably buy a new Mac in the future, still spend money in the App Store and support the development of MacOS software, be more inclined to subscribe to iCloud/Apple Music than DropBox/Spotify etc. and probably more inclined to buy iPhones/iPads - all of which is becoming more/as important as selling the hardware.
Whereas, for some of us, the lack of a "headless" Mac option was becoming a major downside of using Macs. Not sure I'd have stayed with Apple if the only desktop options were an all-in-one iMac with a type of screen I really didn't want or a stratospherically expensive Mac Pro. Plus, it's quite likely that I'll upgrade my Mac Studio
sooner if I'm not forced to replace a perfectly good display at the same time.