Nintendo betrayed Sony at CES 1991 — and created the PlayStation empire

In 1988, Sony engineer Ken Kutaragi secretly designed the S-SMP audio chip for the Super Nintendo without telling his bosses. When Sony executives found out, they negotiated a deal: Sony would develop a CD-ROM add-on for the SNES, creating a hybrid console called the 'Play Station' (SFX-100). Sony would control the Super Disc format and its software licensing. Nintendo's president Hiroshi Yamauchi agreed reluctantly, fearing Sony was using Nintendo to enter the console market.

In May 1991, Yamauchi dispatched Nintendo of America president Minoru Arakawa and executive Howard Lincoln to the Netherlands to secretly negotiate with Philips. Two days before the Consumer Electronics Show in June 1991, the Seattle Times reported the deal. At CES, Sony publicly unveiled its hybrid PlayStation. The next day, Nintendo announced its partnership with Philips. Industry journalists called it 'the greatest ever betrayal' in the gaming industry.

Sony president Norio Ohga was furious. He ordered Ken Kutaragi to develop the PlayStation as a standalone console to rival Nintendo. Despite strong internal opposition — Sony's board saw gaming as beneath the company — Ohga retained the project after Kutaragi reminded him of the humiliation. The team was moved to Sony Music to operate independently.

Sony Computer Entertainment was formed in November 1993. The PlayStation launched in Japan on December 3, 1994, and in North America and Europe in September 1995. It sold 102 million units, making Sony the dominant force in gaming for the next two decades. Nintendo's CD-ROM with Philips was quietly canceled in 1993. The partnership Nintendo had killed to protect became its biggest competitor.