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2001 winner: DataPlay discs. It was hoped that this tiny 500MB storage device could replace the CD as a DataPlay disc could store 5 hours of music vs. 1 hour on a 650MB CD.
How quickly things change from year to year. The main problems of DataPlay discs were its price and the damage it caused to MP3 players. Its DRM prevented a user from deleting the content it downloaded onto an MP3 device. Once content was transferred to an MP3 player, it became permanent. It was called one of the worst gadgets of 2002.