Couple of factors:
1) As mentioned, you have to record it in real time for quite some time in the beginning stages of the format. This would appeal to lots of people who were already recording songs onto tape to listen on their walkman, but it's just not a good solution for people with discman who can just buy the music
2) There was close to zero support from the music industry, partly because of it being the high quality recording (read pirating) medium that it is. Remember how media company rejects CDR, Tivo, Video tape and such for a long time? So essentially the only realy way to listen to music on a Mini-disc is to first record them from another player.
3) When netMD arrives, it could have cleaned the floor with the various MP3 players out there. Back then most of the MP3 players are flash players with 64MB of storage space, and ipod 3rd generation is no where to be seen. However, Sony being a multi-discipline company it is, was unable to implement the solution successfully. Sony music would force the Mini-disc department to not let people burn MP3 onto minidisc easily. You have to burn your songs onto CDRW, then transfer it to MD-player at a relatively slow speed. If Sony made it as easy to transfer music as the ipod, Mini-disc would probably have been a winner.
4) judging from hindsight, Ipod did what Minidisc should have done. Jobs makes it extremely easy to transfer songs to the device, he talked to the record studios and setup ITMS. So now there's a way to get more music without first buying the CD and ripping it onto the MP3 player.
To be fair, the record studios were probably not ready to do that when sony was pushing Mini-disc. I recall seeling Sony Music Mini-disc for sale, but that's it.