Sony's decision to drop its ATRAC file format and shutter the Connect music store signals a radical departure for the electronics giant, which has tried for 15 years to market its proprietary file format as a viable competitor to MP3 and other digital music formats.

Though technically ATRAC has its merits, the format failed to catch on with consumers in North American and European markets (though it's still big in Japan).

The biggest problem: If you wanted to listen to ATRAC files, you were required to use Sony software and hardware, and Sony's offerings never took off like the iPod.

"It's been an interesting year in the music industry, especially with a number of services announcing the move towards non-DRM music sales," said Sony Walkman product manager Mitch Li in a phone call Thursday. "With everything that's going on, it made sense for us to move to more of an open format and to become better positioned to be a participant in this overall ecosystem."

To better position its hardware, Sony debuted two new Walkman players, the NWZ-A810 and NWZ-S610, at the IFA conference in Germany on Thursday. The two players are the first entries in Sony's flagship personal audio player line released in the United States that are capable of playing video. They are also the first to drop support for the Sony-only ATRAC format.

Li said the new players are in response to growing consumer demand for devices that are compatible with the expanding stable of online outlets selling music in MP3 and WMA formats such as Napster and Yahoo.

While the new line of Walkmans are not the first to feature MP3 and WMA support, they are the first to support WMA files with Digital Rights Management data attached. Sony has chosen to add support for Microsoft's PlaysForSure DRM scheme, which is playable through the Windows Media Player 11 application.

Customers will be able to use Windows Media Player 11 to add PlaysForSure-protected purchases to the devices, and for audio and video playback on the desktop.

"If (a customer) happens to like to buy music from Yahoo or Napster or whoever," said Li, "it's nice to be able to say to them, 'Look, you don't have to stop using those services just because you have a Sony piece of hardware.'"

Sony will be shutting down music sales in its online Connect Music store, which sold ATRAC-encoded files only playable on Sony devices. Sony will, however, continue to sell eBooks through the outlet. The Connect music store will remain open for North American and European customers at least through March 2008.

As a part of the transition, the SonicStage jukebox software used by Walkman owners to manage their devices is also being phased out.

In the meantime, Sony will begin phasing out the ATRAC audio format. The company has published an FAQ for ATRAC users instructing them on how to continue to listen to their music, and it has provided a conversion tool that will cross-encode ATRAC files to either WMA or MP3. The conversion tool ships with the new Walkman players, and it's also available as a free download on Sony's website.

ATRAC was originally developed by Sony in 1992 as a way to squeeze an album's worth of music onto its then-revolutionary MiniDisc media. The format uses lossy compression similar in sound quality and execution to MP3.In fact, for several years in the 1990s ATRAC was a viable competitor to MP3 and WMA. But a lack of consumer interest in the format and the popularity of the iPod, which like other non-Sony devices does not play ATRAC files, has resulted in the format's demise.

However, one place ATRAC continues to thrive is Japan, where the debate about file formats and device lock-in doesn't have the impact on the digital music market as it does here. While Sony shuts down its ATRAC-only Connect store in the West, its Japanese equivalent, Mora, will continue to sell songs to Sony device owners.

"ATRAC is simply more ingrained into the way they consume music in Japan," says Li.