Has apple ever given a reason why they dont allow demo/trial apps?
A time limited trial seems like the perfect fit for productivity apps, not sure entertainment based apps would want this model. You have a day/week/month to use the app in its entirety, if after the trial you value the product you purchase it, otherwise it no longer works.
I don't think they ever gave a reason. Personally I like how it has forced developers to come up with more creative product offerings than time limited demos. While convenient for developers, time limited demos suck as a user experience IMO. The whole "trial expired! buy now!" experience is very grating.
I am fairly certain the "trial expired" experience is exactly the reason. They're also trying to make a commodity out of software and having an app store half full of trial versions doesn't help them with that goal.