In the midst of its console wars with Sega and its Genesis system, Nintendo was looking for new and innovative gaming technology. Sega had released the Sega CD add-on for its Genesis console, which was one of the first systems to utilize CD-ROM technology for home console gaming. This allowed for a whole lot more storage than cartridges, which allowed the system to play full motion video for cut scenes and even utilized it for gameplay in certain games. The Sega CD was not very successful, but it was a technological marvel at the time, and so it was apparent that CD-ROM technology would surpass cartridges for console gaming very soon.
In order to stay on top of the latest technology, Nintendo began talking to Sony about forming a partnership in order to create a CD-ROM add-on for the Super Nintendo. A couple of prototypes had been in the works, and Sony had announced publicly that they were partnering with Nintendo to create the “Nintendo Play Station.” However, the day after Sony made the announcement of the partnership, Nintendo unexpectedly announced that they were not going to partner with Sony for this CD-ROM based add-on, but with Phillips instead. This, obviously, rubbed Sony the wrong way. Nintendo and Phillips never released a CD-ROM add-on together, but the partnership did allow for Phillips to use certain Nintendo properties on their CD-i console, all of which are to this day considered to be horrible games.
This proved to be a major mistake for Nintendo, as Sony decided to move forward with the development of their standalone Playstation console, which would end up not only being Nintendo’s biggest competitor, but would also outcompete the Nintendo 64 and make Sony the new leader in the console gaming market.