Back in 1988, Nintendo inked a deal with Sony to produce a disc-based console tentatively titled the "Play Station" (two words). Sony and Philips jointly created the CD-ROM format, which boasted greater capabilities and (at the time) better anti-piracy measures than floppies or cartridges. (Sony also designed the SPC700 sound chip which is found in the SNES.) A Play Station console was shown at trade shows in 1991, and while it was originally envisioned as a way to play CDs on the SNES, a deal was struck in 1992 to have Sony's console sport a slot for SNES cartridges (with Nintendo keeping full ownership and most of the profits from said carts). Everything quickly fell apart when Hiroshi Yamauchi, the then-president of Nintendo realized the contract's wording let Sony have full ownership and profits over the console's games. The company terminated the contract and forged a partnership with Philips — while Sony rebuilt the project from scratch, dropping the cartridge slot and creating the CD-ROM-only PlayStation (now one word)...but not before turning to Sega first. After their partnership with Nintendo crumbled, Sony approached Sega of America and proposed a deal for Sega to assist their developer Sony Imagesoft on developing games on optical discs. Sega of America, who also thought that disc-based consoles were the future of gaming but were having trouble developing their own disc-based add-on for the Sega Genesis at the time, accepted the deal while also convincing Sony that the two finance Digital Pictures on the basis that Digital Pictures had made the most progress on programming games on discs (both Sony and Sega would eventually each publish three games from Digital Pictures). This led to a close relationship between the two parties, with Sony even assisting Sega on development of the Sega CD for a while and the two drawing up specifications of a disc-based hardware system. This ultimately culminated in Sony proposing to Sega of America a optical disc-based console jointly marketed by the two companies, with Sega and Sony sharing the losses made by the console-"the Sega/Sony hardware system". Sega of America loved this idea and pitched it to Sega of Japan for their approval, only for it to get shot down as the head of Sega of Japan was unwilling to believe Sony was capable of developing hardware or software for video games. This led to the relationship between Sony and Sega breaking down and the two going their separate ways, with Sony continuing the "PlayStation" project by themselves. Sega did eventually create their own disc-based console in the form of the Sega Saturn, but it was plagued by a series of problems that turned it into an unpopular platform for both developers and consumers. Sega's role in this is by far the least-known part of the whole affair. It should be noted that Nintendo's moves to snub Sony happened behind Sony's backnote , with Sony and Ken Kuratagi not being informed of the termination until the last minute, at the CES, and in public. Sony's then CEO took that move as public ridiculing of the company (especially since Nintendo snubbed Sony, a fellow Japanese conglomerate, for Philips, a "gaijin", which in the eyes of Japanese businessmen, is as blasphemous as it gets) and thus started to find ways to snub Nintendo back, first trying to partner with Sega, and failing that, giving Kuratagi and the other engineers the ultimatum to build their own console. Sega of Japan looking down on them only making Sony's CEO more determined then ever to push out a console. Nintendo later terminated its contract with Philips, and the latter company created the CDi — which featured three games based on the Zelda franchise and one based on the Super Mario Bros. franchise (another two were planned, one based on Super Mario World and another called Mario Takes America, but didn't get very far). These games were all reviled (although it's almost always the low-quality animated cinematics of Hotel Mario, Link: The Faces of Evil, and Zelda: The Wand of Gamelon that draw the ire...or the mockery), and are best left unmentioned in discussions about their parent franchises. During this situation, Squaresoft — known these days as Square Enix — was becoming increasingly frustrated with with what they saw as draconian censorship policies by Nintendo, publishing restrictions, and refusal to move away from cartridge media (which, at the time, had far less storage space than CD-ROMs). Squaresoft — then Nintendo's most popular third-party development studio — eventually signed a contract with Sony, which eventually published the PlayStation's Killer App: Final Fantasy VII. In other words, Nintendo and Sega indirectly created one of their greatest rivals. A rival that actually killed Sega as a console developer, forcing them into making third-party games. Nintendo fared rather better, though they got thoroughly trounced in sales by Sony for a decade before making their big comeback with the Wii. Nintendo's next system, the Nintendo 64, was the only cartridge-based system of its era. Nintendo's decision to stick with cartridges when other systems had moved on to a CD-based format was boneheaded, but this isn't the place to discuss that. Nintendo's systems after the N64 use discs, but the Nintendo GameCube's discs were half-size (80mm) and weren't quite mini-DVD, while the Wii discs aren't quite DVD either and the Wii U is said to use a proprietary format which isn't Blu-Ray. As an aside, the company who was really scared of all this was Atari, whose Jaguar console wasn't doing too well against the SNES and Sega Genesis (despite apparently being the technologically-superior system). Then-CEO Sam Tramiel began idiotically boasting about how the Jaguar was better than both the PlayStation and Sega Saturn, neither of which had been released at the time, and threatened to take Sony to court if it sold the PlayStation for less than $500; Sony did ($300)...and Tramiel didn't. Atari's foray into the CD format (a CD add-on for the Jaguar) didn't help matters, as only 15 games were made for it (none of which were very good) and it was really badly designednote . As another aside: an enterprising emulator developer, byuu, took it upon themselves to create a "What If" situation as to what this CD-ROM add-on could've been capable of. To that end, the MSU-1 enhancement chip was created with media streaming capabilities and a storage capacity of 4GBytes, well above any official game ever released. There's currently one game that uses it: Super Road Blaster, a homebrew SNES port of the Sega CD game Road Blaster (size 512MBytes). If nothing else, it's worth watching a true CD-quality game running on an actual SNES (albeit with a modern flash cart with a built-in MSU-1). A true SNES CD-ROM prototype unit (possibly the last of its type, as both Nintendo and Sony ordered the prototypes, numbering 200, destroyed) has been discovered as of late, and the owner has given several interested parties the right to do a teardown and reassembly before selling the prototype off. Information obtained from the teardown is currently being scrutinized by various parties. It should also be noted that the prototype's optical disk reader does not work, due to several bugs in the firmware.