From what i read the contract between them was signed before it was fully read by the Nintendo execs.
Whoever was supposed to sign it was away on business and when he returned he read the contract and refused to honor it.
In typical sony style they wanted full owndership of the games made for the CD unit, inclucing the ones nintendo made. Any fool can see that just isnt going to happen.
Nintendo then sneaked off to Philips and signed a deal to put Mario and Zelda on the CD-i, for a Japanese company to betray another japanese company is one thing, but to goto an English company is another. What made things worse was the heads at Sony were stoked about the deal and announced it to the press.
I wouldnt say this was totally nintnedos fault, the contract should never have been signed and Sony were being very greedy, but at the same time it was wrong of Nintendo not to honour a contract.
Sony came out ok in the end anyway and i think the whole failure of the Cube and N64 is the reason we have the Wii today.
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