The Play Station was to be announced at the 1991 Consumer Electronics Show (CES) in Las
Vegas.[32] However, Nintendo president Hiroshi Yamauchi was wary of Sony's increasing leverage
at this point and deemed the original 1988 contract unacceptable upon realising it essentially
handed Sony control over all games written on the SNES CD-ROM format. Although Nintendo
was dominant in the video game market, Sony possessed a superior research and
development department.[33] Wanting to protect Nintendo's existing licensing structure,
Yamauchi cancelled all plans for the joint Nintendo–Sony SNES CD attachment without telling
Sony.[34][35][32] He sent Nintendo of America president Minoru Arakawa (his son-in-law) and
chairman Howard Lincoln to Amsterdam to form a more favourable contract with Dutch
conglomerate Philips, Sony's rival. This contract would give Nintendo total control over their
licences on all Philips-produced machines.[36][28]
Kutaragi and Nobuyuki Idei, Sony's director of public relations at the time, learned of Nintendo's
actions two days before the CES was due to begin. Kutaragi telephoned numerous contacts,
including Philips, to no avail.[37] On the first day of the CES, Sony announced their partnership
with Nintendo and their new console, the Play Station. At 9 am on the next day, in what has been
called "the greatest ever betrayal" in the industry,[36] Howard Lincoln stepped onto the stage and
revealed that Nintendo was now allied with Philips and would abandon their work with
Sony.[19][38][39]
Inception
Ken Kutaragi, the "Father of the PlayStation", pictured at the Game
Developers Choice Awards in 2014
Incensed by Nintendo's renouncement, Ohga and Kutaragi decided that Sony would develop
their own console.[40] Nintendo's contract-breaking was met with consternation in the Japanese
business community,[19] as they had broken an "unwritten law" of native companies not turning
against each other in favour of foreign ones.[28] Sony's American branch considered allying
with Sega to produce a CD-ROM-based machine called the Sega Multimedia Entertainment
System, but their board of directors in Tokyo vetoed the idea when American CEO Tom
Kalinske presented them the proposal. Kalinske recalled them saying: "That's a stupid idea,
Sony doesn't know how to make hardware. They don't know how to make software either. Why
would we want to do this?"[41] Sony halted their research, but decided to develop what it had
developed with Nintendo and Sega into a console based on the SNES.[41]
Despite the tumultuous events at the 1991 CES, negotiations between Nintendo and Sony were
still ongoing. A deal was proposed: the Play Station would still have a port for SNES games, on
the condition that it would still use Kutaragi's audio chip and that Nintendo would own the rights
and receive the bulk of the profits. Roughly two hundred prototype machines were created, and
some software entered development.[28][42] Many within Sony were still opposed to their
involvement in the video game industry, with some resenting Kutaragi for jeopardising the
company.[43] Kutaragi remained adamant that Sony not retreat from the growing industry and
that a deal with Nintendo would never work.[19][36] Knowing that it had to take decisive action,
Sony severed all ties with Nintendo on 4 May 1992.[44]
To determine the fate of the PlayStation project, Ohga chaired a meeting in June 1992,
consisting of Kutaragi and several senior Sony board members. Kutaragi unveiled a proprietary
CD-ROM-based system he had been secretly working on which played games with immersive
3D graphics. Kutaragi was confident that his LSI chip could accommodate one million logic
gates, which exceeded the capabilities of Sony's semiconductor division at the time.[45] Despite
gaining Ohga's enthusiasm, there remained opposition from a majority present at the meeting.
Older Sony executives also opposed it, who saw Nintendo and Sega as "toy"
manufacturers.[30] The opposers felt the game industry was too culturally oFbeat and asserted
that Sony should remain a central player in the audiovisual industry, where companies were
familiar with one another and could conduct "civili[s]ed" business negotiations.[46] After Kutaragi
reminded him of the humiliation he suFered from Nintendo, Ohga retained the project and
became one of Kutaragi's most staunch supporters.[25][47]
