The Nintendo Playstation was going to be a peripheral for the SNES that improved graphics, sound, and also had a CD system in it to allow for more expansive games.
What happened isn't for sure. But the rumor is that Sony's lawyers had come up with a way for Sony to not only make money off of the peripheral, but off of every game published on it. Nintendo didn't like the latter, so they decided to partner with Phillips and work on the CD-i. Sony got pissed, finished up the few games they were working on for the SNES, and started working on their own system.
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