I bought an iPod in that era, and didn't buy a single DRMed song -- ripped all my CDs, that was more than enough. If you look at iTunes revenue vs iPod sales, most people did what I did. Sony didn't support that. And the smaller companies that pioneered ripping+mp3 players had less-attractive products and interfaces.
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats.
Ipod+rip in the west, was probably equivalent to cd rentals + minidisc "single digital copy" of Japan.
Sony wanted to keep the minidisk ATRAC codec (arguably much better than mp3, unfortunately while mp3 became ubiquitous despite patents, ATRAC never did) along with the draconic drm.
I lived a year in Japan in 1997-98 - I recall a fellow high school student had racks upon tracks of "pirated" MDs at home. It was a similar price model to streaming; less pr cd/disk, but "at least something" - as everyone would rent a CD and buy a blank mini-disk - and rip at home. No digital/lossless copy from a copied MD to a blank.
Classic example of the west being slow at adapting some tech, then "jumping" to the next (here, using a computer to rip cds, not dedicated hw, like an MD deck and cd player, linked via digital coax/optical cable). And then skipping cd rentals in favour of first pirated music, then streaming. Much helped by by free software like Winamp that AFAIK ignored the licensing on mp3 in most cases.
The iPods were certainly helped by mp3 file-sharing - that probably wouldn't have happened if they could only play back aac or whatever - if they weren't mp3 players not merely music players.
