People were already vested in CD. Homes, cars & PC's. Not convienient enough to make people run out and buy all new hardware when people could already rip, burn and share with what they had. Then when MP3 players started popping up, then a real convenience was recognized.
Especially when Apple took charge and added a nice GUI.
Even before MP3 players came out, DVD was also out for 5 years, which also doubled as a CD player for all.
I suppose, another thought would be why the cassette format didn't get dumped right off when MD was introduced. Big in Asia I guess. Still had a lot of cars with tape decks & People still had a fair amount of tapes too. Maybe what's needed is enough pre-recorded media to give a recording format more of a back-bone for marketability as well.
DVDs were not introduced until around 1996, with a gradual rollout across the world, meaning they didn't really take off here until about 1998. Proprietary digital audio players came just before that (1997), SaeHan introduced what is usually considered the first MP3 player at about the same and the Diamond Multimedia
Rio was released after that in 1998 (which was the first widely popular MP3 player and finally trigger the RIAA lawsuit (which RIAA ultimately lost). Cellphones were being released with them by 2000 and the iPod itself was fairly late, coming out in 2001.
The real news is that the prototype for all of them was invented in
1979, called
IXI but never produced commercially. In effect, the compact disc was being replaced before it was even introduced. IXI was the basis for Apple's iPod development however and the inventor of IXI was on the iPod development team.
There was a good reason why DVD players were generally CD players also (compatability, of course and at a time when the format wasn't fully established yet and the disc size was the same), but it's not as easy as it might sound to you. DVD and CD use altogether different wavelengths of light to be read (the reason is because DVD information 'pits' are much tinier and therefore a narrower beam requires a higher wavelength of light), so there are TWO laser diodes/read heads in a DVD player to accomodate these differences. So DVDs are NOT just fancier video CDs (VCD uses an earlier compression format) but an entirely new approach to optical media.
The reason that MD thrived in Asia and Europe for so long in my opinion is that the culture for new technologies was more ingrained there than here and introducing new technologies meant confusion to US consumers. First of all, it looked like a computer diskette, but it couldn't be used in that. Secondly it was promoted like it was a smaller, recordable version of a Compact Disc (and you still couldn't use it in a CD player and 3 inch CDs had been introduced about then in music titles as singles and as compact recordables which made it all the more confusing). Lastly, and a huge factor was that the US and world economies might have still been somewhat robust at the time but they were already headed into a tailspin and by 2000 the controversial energy trading scandals and terrorism emerging in the US made consumer buying power permanently changed and battered. All of these things came into play before MP3s were a global phenomenon. Americans couldn't support a bunch of platforms they didn't understand well or were even certain if they'd last long and as they tend to do they either find one and go with it or ignore all of them in droves.