Simple: no content.
The technical offerings by Sony sucked. The Science Fiction section was small. The other sections may have been fine for all I know–but if they followed the model of these other two sections, they sucked as well.
I have a Sony Reader, and the primary thing I use it for is to view specially formatted RTF and PDF files which I’ve transferred from the ‘net: every time I log onto the Sony web site, I’m disappointed at the lack of content. It could very well be that Sony’s primary deals are with Japanese publishers.
The Sony Reader itself is a wonderful electronic device, and if they had simply made a deal with anyone–even the eReader folks for content–it would have been more successful.
Which is why I think the Amazon Kindle may have a better chance: already on launch Amazon has more content than the Sony Connect site has after a year of being out.