Nintendo and Sony were building a console together. The divorce took one day

The link between the companies began not with a console but with sound. Sony engineer Ken Kutaragi built the SPC700 audio chip for the Super Famicom — at first almost clandestinely, because Sony's management did not consider games a serious market. Norio Ohga, then president, covered the project with his own name. The chip went to Japan, and in 1988 the companies signed a second agreement: Sony would build a CD-ROM drive for Nintendo's console.

The agreement contained the clause that decided everything. Rights to the CD-ROM format on that platform stayed with Sony, which meant licensing revenue from any disc-based game would not go to Nintendo. For a company then building its entire economics on control of cartridge manufacturing, that clause was unacceptable. Hiroshi Yamauchi read the contract and instructed Howard Lincoln, head of Nintendo of America, to find another partner.

Two stages, one after the other

On 1 June 1991 at the summer CES in Chicago, Sony took the stage and showed the Play Station: a machine that read both Super Famicom cartridges and compact discs. It was the day Kutaragi had worked three years for.

The next day Lincoln took the stage and announced that Nintendo's disc console would be built with Philips of the Netherlands. Not one word about Sony. Sony's executives learned of the split sitting in the audience among the journalists.

The fight was not about hardware. It was about who collects the money on a format.

The Philips terms returned control of the CD format to Nintendo, and in exchange Philips got the right to publish games with Nintendo characters on its CD-i. That is how three Zelda titles and Hotel Mario appeared in 1993 and 1994, games Nintendo has tried not to remember since.

What grew out of the insult

After Chicago, Kutaragi nearly lost his job. Ohga let him continue but moved him out of the main structure into Sony Music, where there was no corporate resistance. From there, on 3 December 1994, came the PlayStation, with no Nintendo in it: a standalone 32-bit disc machine. It sold over a hundred million units.

The Philips disc unit for the Super Famicom never shipped. Nintendo stayed on cartridges through the Nintendo 64 — a decision that five years later cost it Square and the Japanese role-playing genre entire.

Around two hundred Play Station prototypes were built. One surfaced in 2015 with the Diebold family, who had bought the assets of a bankrupt company at auction, and in March 2020 it went under the hammer for 360,000 dollars: the only surviving example of a console that did not exist.

Keep the episode in mind when reading news about storefront commissions, exclusivity and platform obligations. In 1991 Yamauchi did not refuse a partner. He refused to hand another company a tax on his own ecosystem, and got in return a competitor who built one.