Sony admitted it was wholly wrongheaded in its digital music strategy, and that it had let Sony Entertainment stifle innovation from its Electronics division — which is precisely why they’re not even an also-ran in the portable digital music market after having invented the whole notion of portable, personal music in the eighties:

Sony admits MP3 error
Yuri Kageyama in Tokyo
January 21, 2005
SONY missed out on potential sales from MP3 players and other gadgets because it was overly proprietary about music and entertainment content, the head of the company’s video-game unit said. Ken Kutaragi, president of Sony Computer Entertainment, said he and other Sony employees had been frustrated for years with management’s reluctance to introduce products like Apple’s iPod, mainly because the Sony had music and movie units that were worried about content rights. But Sony’s divisions were finally beginning to work together and share a common agenda, Mr Kutaragi said at the Foreign Correspondents Club in Tokyo. “It’s just starting,” he said. “We are growing up.” Sony officials have rarely publicly said the company’s proprietary stance was mistaken. Mr Kutaragi, who has long been viewed as a candidate to lead Sony, was unusually direct in acknowledging Sony had made an error. Sony’s music players did not initially support MP3 files and only played Sony’s own Atrac format. Sony’s technology innovation had been “diluted”, Mr Kutaragi said “We have to concentrate on our original nature – challenging and creating,” he said. Once the powerhouse of global electronics, with success exemplified by its Walkman, Sony has lost some of its glamour lately, losing out in profitability and market share to cheaper Asian rivals. Mr Kutaragi – known as the “Father of the PlayStation” for making the game machine a pillar of Sony’s business – said the new PSP, or PlayStation Portable, handheld will grow into a global platform for enjoying music and movies as well as games. The Associated Press