The basic point is that people who buy electronics want products that are as flexible as possible: products that can communicate with each other, products that can record and duplicate software, and products that don't have silly limitations built into what they can do. The content companies, on the other hand, want to restrict what electronics hardware can do because they are terrified of piracy. Therefore, Sony has difficulty releasing really cutting edge electronics products, because this would be seen as undermining the music and movie business. As Wired puts it, the contradiction is thus:
Instead, it's tried to play both sides. As a member of the Consumer Electronics Association, Sony joined the chorus of support for Napster against the legal onslaught from Sony and the other music giants seeking to shut it down. As a member of the RIAA, Sony railed against companies like Sony that manufacture CD burners. And it isn't just through trade associations that Sony is acting out its schizophrenia. Sony shipped a Celine Dion CD with a copy-protection mechanism that kept it from being played on Sony PCs. Sony even joined the music industry's suit against Launch Media, an Internet radio service that was part-owned by - you guessed it - Sony.
Of course, Sony's competitors are not so constrained. The typical strategy of big companies (Panasonic, Toshiba, etc) is to pay lip service to the content industry's concerned, but to largely give their customers what they want. There are more and more smaller competitors, largely Chinese, and these companies have no scruples at all. What is the likely long term consequence for this? Well, Sony loses its preeminence in consumer electronics, possibly. They bought the content companies in the first place so that they could supposedly get "synergies" out of selling both hardware and software. They never actually succeeded (although they did not lose as badly as Panasonic, who purchased MCA/Universal Pictures), and the content companies are now a big obstacle to Sony's core businesses. They need to sell them, although they are not likely to get a very good price in the current environment.