Sailed to nowhere. If it had an effect at all, it destroyed Samsung profit share, but left the Android/iOS market share split virtually unchanged. Big iPhones were a necessity to fend off competition, but so were iPad mini and iPad Pro, which doesn't mean the preferred form factor for most people didn't stay with the iPad Air size. The difference is, with not offering a small iPhone for two years in a row, Apple expressed its expectation that the small form factor was no longer relevant. The rumored iPhone SE can be seen as a shift of opinion within the company.
No I don't remember 2012, but I remember 2007 the first iPhone keynote when Steve Jobs pointed out in detail why physical keyboards are the enemies of progress ("Can't add a button."). Too bad you needed more than 5 years to realize what was obvious to everyone from the beginning. A 4-inch iPhone isn't technology from the past unless you put old technology in it. With the rumored specs the iPhone SE is every bit a modern smartphone just in a smaller form factor.
You're not wrong with one thing, so you must be right with another thing? Sorry that's not how it works! Better for media consumption is not the all deciding factor, otherwise we would all use 15 and 17-inch MacBook Pros.
Good for you, if you already have the iPhone you always wanted. Just wait five years to see if not you come around on hand-sized iPhones again.