Ken was refuting this speculation because he doesn't see it as enabling Sony to get a one-up on Apple - after all, their devices still can't play DRM'ed music from the iTMS. I think he's only partially right though. To be clear: I don't think supporting AAC will help Sony to dethrone Apple's dominance in the digital music player market anytime this millenia, but it certainly could boost their sales to all sorts of individuals who who might prefer the iTunes experience, or want to own more than one device, share libraries - you get the idea.
iTunes, the iTMS and the iPod are such a huge hit because they're all incredibly well designed and so darn easy to use. Apple's controversial philosophy of controlling both the hardware and the software has hit one out of the park - and then some. However, plenty of statistics on the number of iTMS songs per iPod can be found everywhere, and the numbers aren't amazing. I've seen everything from 5 on the low end up to 25 on the high, and I'd bet that, on average, even the newest of new iPod owners easily has far more music stuffed into their iPod by day two. Granted, a lot of people are illegally downloading a lot of their music, but they're also making that music themselves by ripping CDs from their own collection and their friends'. And what format do you suppose is the default for ripping music in iTunes? Hint: it isn't MP3. Sure, AAC isn't 'Apple's format', but the company sure is AAC's biggest pimp.
This is the music that Sony is going after. They're betting that by (finally) supporting MP3 and now AAC, their devices can play what is arguably *most* of the music that users have cataloged in iTunes. While I love the iTMS as much as the next customer (I've purchased over 520 songs from it), Sony simply doesn't need to care about not being able to play FairPlay tracks because, by comparison, there just aren't that many of them. Apple doesn't want to open their system to other manufacturers, and they don't have to - other manufacturers are (legally) coming to play in Apple's sandbox, which is mostly made up of music that is not from the iTMS.
With moves like this from major companies like Sony, I'm wondering how soon we can start declaring this market a win for Apple, but also a win for companies who can become big niche players. My Sony Ericsson Walkman phone, for example, can play AAC music and hold more than a 1 GB nano (yes - oddly, other Sony-related devices, like some of their phones, have supported AAC for a while now). And it can make phone calls. And take 2 megapixel pictures. Sure, its interface makes me want to cry, but that's why I mainly use its music abilities when I work out so I don't have to risk bouncing around the hard drive in my iPod like a pinball machine when I run.
Sony's support of AAC sure won't replace a lot of iPods, but it can offer many consumers a choice in devices for some of the other uses in their life.