Good product is first about understanding the user and the problem statement very well foremost. Most product moats are just that, everything else is a function of that.
Designing a great UX to interact with the system is the other key ingredient, that requires step 1 and also a great deal of creativity.
Anyone can copy same the features after someone as good as Christian Selig has made an app, Few can do similar or better starting on their own, especially indie developers, so he can always be ahead if he wants to.
Christian also chooses apps to work which are third party platform controlled for a reason I think. He can operate in markets like this as a extremely talented indie developer that very few competent teams with capital funding would attempt with platform risk. Beeper is the most recent example on Apple, Christian himself got burned in Reddit[1][2].
Finally he prices at a point so low that people are just paying for the brand - for a well designed reliable software which won't crash on them.
He likely will not lose all that much sales if a lower priced/free product comes out Safari browser based Youtube.com is already there .
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[1] He can afford to in the sense his monthly cash burn is very low compared to any normal company and he doesn't have 100's of employees to worry about if he gets kicked out.
[2] Even then he has carefully choose an API that Google will have a hard time just blocking him ( and not every other use of embedded playback), and he also is careful not to use APIs to render the UI he has just skinned the main website with light CSS.
