That's exactly what I heard as well. If that is true than it was Sony that ruined their contract with Nintendo. I believe many are blinded by the success of the PS1's success that they will possibly believe they earnt every right to ask for more. Forgetting Nintendo at that time, were the market leaders, they revived and recreated the console market. If Sony wanted to be part of it than they could have clearly got in with asking for less, but judging Sony at the time who were one of the biggest electronical brands in the 90s probably wouldn't accept less. 

The reason I brought up Sega adds to the fact that 2 of the biggest console platforms at the time said no to Sony makes you wonder, why.

Anyway its all speculation, weather Sony wanted more or Nintendo just wanted to be evil is all we will ever know. 

LOL, Ninty's giant crow ended up pecking at Ninty's arse itself.

Eeeeerrrr let's say again so you get it. Sony and Nintendo already had a contract, or do you really think they developed the prototype for SNES without a contract? And that prototype is what them got them started on Playstation.

From what is told Nintendo later thought the contract was of to much benefit to Sony and left. Still that is Nintendo breaking a contract they signed because another party were going to receive more money than them. Funny enough is someone thinking Nintendo would be naive to have signed the contract without reading. So it is much more probable that they were fine with the terms of the contract, but later thought they would review and think Sony was getting to much out of it, and you may disagree but that is where greed would come in place.

Nintendo didn't broke a code, they broke a contract.

There would be no way of R&C crossing to Xbox simply because the IP is OWNED by Sony, FF was never owned by Nintendo it was just released over there. Is Sony pissed at Universal or Activision because they lost Crash and Spyro IPs even when buying the studio just because those IPs belonged to another party instead of the studio? Hint, nope.

If that was the actual case than sure Nintendo broke the code and I will say the same for them, however I believe their was more to it than them breaking the contract, and unless we have actual proof of what happened, it is just a guessing game and feels to me more like it was both for greed. Anyway let me say this again so you understand, that is NOT the topic we are talking about, this is about Square leaving Nintendo, what ever Sony's and Nintendo's business was is another topic altogether. Also Sunset Overdrive was not a Sony IP nor was it even a game, if Square went off to make another IP for Sony than no one would  have cared, but the fact it was a well established IP that was made famous on Nintendo platforms. Square dropping everything and left is why Nintendo was pissed. Like I said, very different circumstances for two very different scenarios.

I wont debate who's right or who's wrong but if people wonder why Nintendo would take this type of action is becasue of the obvious.

Yes, Nintendo wouldn't care, so much that for NES they forbade any company that developed to their system to develop to other system. And during SNES if a game launched on it them it couldn't launch anywhere else. Those evil SE and Sony backstabbing angel Nintendo.

Ill argue that quality needed control and that's because of Nintendo saving the industry from falling under. Harsh actions needed to be done. Damn Nintendo for taking hard action on a very corrupted industry back than.

All I will say on this matter is:

HA! Nintendo had it coming after what they did to Sony. As they say, Karma is sure a bitch, isn't it? Who can forget when Nintendo turned their back on Sony like that??? So, they just got a taste of their own medicine not only with Square leaving them, but Sony creating the best-selling gaming console in history with the PS1. It was a double wham!

I don't feel sorry for Nintendo in the slightest. Everything happened for a reason.

As you said, things happen for a reason.

One of the reasons why Nintendo backed out of the Sony deal was because apparently the deal included Sony having a large amount of control of software licensing. So this may have affected Nintendo's control of the software they would have had to develop under such partnership, as well as profits since they benefit a lot out of selling millions and millions of their own software.

Nintendo turned Sony away because Sony wanted a contract that obtains the rights to software made on the platform no platform holder would accept this not even Sony themselves which is why even Sega turned Sony away as well when they tried to partner with them. You're talking karma well funny enough some former SE employees are now part of one of the biggest first party studio at Nintendo and have created one of the best JRPG franchises around.

They already signed a deal. Also former employees of almost all companies are in other companies.