I hate when people claim the biggest mistake Nintendo ever made was breaking their deal with Sony. These people clearly have no idea what the terms of that deal were. Sony was going to get the licensing royalties for the format, not Nintendo, which may as well have been a competing product since the machine was going to be a stand alone rather than an add-on. Basically, they were trying to convince Nintendo to let them manufacture SNES consoles and give their royalties over to Sony. If that sounds like a good deal to you, you're crazy. Sony was trying to break into the console business by riding Nintendo's success, and they would have made their own system by the next generation and cut Nintendo out altogether.
So no, it wasn't Nintendo's biggest mistake. It didn't create a competitor, it kept their competitor to be from riding a huge wave of success off of Nintendo's efforts. They couldn't stop Sony from taking the #1 position in the industry, and partnering with them wasn't going to change that. Dealing with Sony at all may have been a huge mistake, walking away from that terrible deal was not.
So the correct answer is the Virtual Boy.
You do not have the right to never be offended.
