A common refrain during the Napster lawsuit was that "the law needs to catch up to technology". This is hilariously wrong, looking back on it. The music industry was very adamant back in the 70s and 80s that consumers shouldn't have access to audio recording technology, especially not digital copies. As a result, the law was about 20 steps ahead of technology. Any and all consumer audio recording technology had to prevent second-generation digital copies via SCMS.
The fact that MP3 players were even allowed to exist (see RIAA v. Diamond) is a minor miracle; birthed from a legal battle that I doubt Sony was at all interested in fighting. At that point they had literally bought a record label, which pushed a lot of internal corporate changes within SONY. It's far harder to justify selling devices to copy music when you also happen to sell music.
(Of course, Apple wound up completely monopolizing music sales for a decade by more or less ignoring all of the above, getting involved in both sides of the business, and just using the superior user experience to steamroll over both labels and other device manufacturers.)