Dedicated mp3 players are not really seen anymore, I can't recall the last time I saw one. Or I can, and that was around 10 years ago. You stated the reason why, the technology has been integrated into smartphones so there's no need for a separate device. And part two, it's a lot easier to get an mp3 file onto a smartphone than onto a dedicated mp3 player because there's no electronic middleman, it's internet straight to music folder rather than having to load the mp3s from your computer.
As far as listening, I believe people still do. I prefer satellite radio in my car (or I will when I get around to re-subscribing, for now silence is my music), and either stream it to my computer or use the music channels on DirecTv because I'm too cheap to buy music and too lazy to find a music sharing site of no cost and questionable legality. But I also know that people will fill up their phones with music and either listen non-stop all day through headphones or set up their cars to stream music from their phones through the speakers.
