Apparently Sony was planning a UMD-less PSP from the very beginning - we just weren't ready for it back in 2004/2005.
In an interview with Japanese site
GameBusiness.jp, the head of SCE's product planning division, Naoya Matsui, said, "We'd planned to release a PSP model without a UMD drive since the very beginning. But if we'd simply released the hardware, there wouldn't have been much for everyone to enjoy. We needed to prepare the right environment for it first - things like the transferral of content with the PS3 and PSN, and PC software to manage content like music and movies such as 'Media Go'.
"We wanted to release it when the delivery of digital content was on par with the delivery of physical media. Thats what we've been working on these past two years. We'll be selling the PSP Go alongside the existing PSP models, because it's a product targeted at those people who are more accustomed to digital content."
If
certain UK indie retailers are to be believed, however, those who are "more accustomed to digital content" and actually interested in the PSP are few and far between.
Translation via Develop