At the time Sony owned record companies and, foolishly, thought that they would make more money from IP than hardware. So they crippled their music players.

I had a Sony MP3 player in 2000. It only played atrac files and I had to specially rip and encode my cds to be able to play. The hardware was neat, it was like a thick pencil. But the software was purposely horrible because Sony wanted to not allow mp3s or songs bought outside their ecosystem.