Its not so much that, though thats part of the reason. The fact they alienated anyone who already owned a psp was a giant "fuck you" from sony. If they had offered some sort of free-ish umd to digital transfer for all your umds, I'm willing to bet many more people would have bought that failed piece of crap. The fact that if you wanted to "upgrade" to the go you had to ditch your entire umd library was just a big kick in the nuts.
It also doesn't help the fact that psn is still missing a great many psp games, and some developers have announced that they will "not" put their games on psn for the go, such as square's kh: birth by sleep