I didn't know Dennis was an audiophile. I still get a thrill from good vinyl played on my perfect vintage Thorens (Shure v15 V magnetic) through my hot rodded Musical Fidelity integrated (the only component in my system made in the last 10 years, and it has a tubed front end), and restored KEF 104/2 speakers, in stereo like Saul Marantz intended. Depending on the mix, the 104/2s can not only tell you where each musician was on the stage, but audience noises--cheers, claps, coughs--often seem to come from behind me. Good sound is eerie that way. It's not live, but done right it can almost be better sometimes.
I would just say that the iPhone is capable of very fine music reproduction using ALAC files of well-recorded source material. The op-amps of the iPhone 5 sound quite good with a decent headphone amp and good cans.
These kids today may not care about good sound but there are some grownups over at Apple who do. Now if they could only open up an ALAC section in the Apple Store. For now, my ALAC files are either recorded live or ripped from CD or SACD.
Dennis is probably right that we have succumbed to convenience and there probably won't be a market for high-res digital sound files. They sound worlds better through my equipment, but through $10 earbuds there's not a dime's worth of difference between lossless and low bitrate mp3.