The p2p audio piracy portion of Napster was shut down by 2001. The other common p2p sharing platforms like Kazaa, gnutella, et al. mostly supported any type of audio format (at least from what I can remember). People wanted mp3 because in their mind, mp3 == music. The hardware devices like iPod & Zune mostly had support only for formats like MP3, AAC, WAV, and AIFF (I asked ai this, so take that for what it's worth).

Anyway, it's just another example of hardware mfgs not supporting open formats, so we don't need to get too deep in the weeds trying to remember history.

I remember the history quite well and it was just a matter of ecosystem and momentum.

MP3 had mindshare. That's was what people knew and it was what people asked for. People bought MP3 players. People built software that ripped MP3s. The sales guy at the electronics store knew what MP3 was. Everything worked with MP3 and so that was what people bought and downloaded and used.