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Yes, it was considered a horrible slap in the face in Japan because they went with a non-Japanese company, but if I remember right, all the things Sony wanted the rights to were kinda ridiculous as well. It certainly created some bad publicity for Nintendo in Japan, and helped start Sony in on the video game market, but there's no way to know how things would have turned out. Yes, it was a horrible thing for Nintendo to do when Sony found out about them backing out of the deal by announcing the deal with Phillips, but they've learned some from their former arrogance (hopefully).