I get what he's saying and I experience this myself especially if moving to streaming services like Netflix and Spotify (and soon, Apple Music) rather than those old download-based services. That places restrictions on offline use, but at least the streaming music services manage that well while still consuming only a fraction of storage compared to what they once did.
However... I think this quote of his highlights another problem:
Schiller also said that using 16 GB storage for lower-end models allows Apple to save money for use on higher-end components in other parts of the device, like the camera.
Hold on there! A higher end camera like the rumored high MP camera will noticeably more quickly consume space on a 16 GB device. A 10 MP photo consumes not 2x more space compared to a 5 MP photo, but 4x the space.