There's a long list of user interfaces that, while really useful for specific purposes, have fallen by the wayside. For example, the automotive stick shift. You can reach out and immediately know just what gear you're in (once you've memorized the shift pattern). Thing is, most people prefer automatic transmission, since they barely have to give a thought to what gear they're in.
Part of the smartphone's triumph is that it reduces the number of items you need to carry. Cell phone, music player, camera, pager, Blackberry, calculator, laptop, e-reader, stopwatch/timer, GPS.... While each person's particulars will be different, I think the overall versatility of the smartphone severely limits the business prospects of dedicated-purpose devices.
I fully appreciate that some people, while exercising, also want to manipulate the music they're hearing, and that the click wheel is a really good interface for that purpose. The trouble is, the number of people who find that a necessary feature seems to be pretty small.
For the most part, if I'm listening to music when I go for my walks (my choice of exercise), I start a playlist and start walking. End of music manipulations. Meantime, I find it far more useful to have my "Swiss Army knife" in my pocket for activity tracking, communications... even nature photography ("The best camera is the one you have with you"). If I choose to answer a phone call, the music automatically pauses and the conversation takes place in the same EarPods I was already wearing.