In college, some of my favorite business courses involved the case study of major corporations who made massive mistakes. One area of particular interest was the world of technology and electronic entertainment. The home video game business alone should be mandatory review for any up and coming MBA student. For instance, did you know that Atari could have become the sole U.S. distributor of the Nintendo Entertainment System? Or that Nolan Bushnell, founder of Atari, could have owned a large percentage of Apple Computer had he just trusted his egocentric apprentice Steve Jobs and chose to invest in Apple from the start? Even Commodore, the once leader of the 1980s computer revolution, could be alive and well today if they had adopted CD-ROM technology earlier instead of throwing it on the backburner.
As interesting as some of these stories are, there is one lesson buried in the iconic history of the home video game market that still causes severe pain to one successful company to this very day. By now you must be asking why this article is appearing in a publication on antiques and collectibles and not in some business student’s thesis, so I should probably answer. On Feb. 14, 2020, Heritage Auctions will feature the now infamous Nintendo Playstation prototype system at auction. This is the only known Nintendo Playstation system in existence and was the center of a huge fiasco that cost Nintendo dearly. Even if you have no direct interest in the home video game market, the lessons learned from this failed partnership between Nintendo and Sony are well worth reading.
The year was 1988, and Nintendo was the leader of the home video game market but knows that without a powerful new system to debut soon, its chances of keeping that dominance were slim. Nintendo is secretly at work on its forthcoming Super Nintendo Entertainment System (also known as the SNES), which is set to debut in North America in 1992. Nintendo was always good at reading the future and incorporating new technology into their products. Nintendo was also quite conservative and only sought new technology when it would benefit their core consumer base. This is one reason why Nintendo succeeded in the world of home video games while other rivals, like Sega, failed. CD-ROM technology was the latest buzzword in the electronic entertainment industry at the time, and Nintendo knew that eventually they would have to latch on to the concept of their games being released on optical discs as opposed to expensive cartridges. This caused Nintendo to want to pursue partnerships with leading companies who pioneered CD technology. The idea was to make an add-on system for its up and coming SNES console that played specialized CD-ROM based games with enhanced graphics and special effects. The add-on would be sold separately for owners of the original SNES console and also made as part of a new integrated all-in-one console that would launch later.
It was this idea that led Nintendo to contact Sony, who at the time had absolutely no interest in entering the home video game system market. In fact, Sony was so against the idea of entering the market at this time that it is rumored the meeting between Nintendo and Sony took place without the permission of company executives. Sony helped create the sound hardware for the SNES console and was a leading developer of CD technologies. When Nintendo pitched the idea of the SNES CD-ROM add-on to Sony, Sony stated that they could develop a new disc-based format called the Super Disc format. Nintendo thought they would have the upper hand at negotiations, but Sony was very experienced at licensing and maintaining licensing rights to new technology. As a result, the contract that Sony provided Nintendo at the time stated that Sony would retain control over a large portion of the Super Disc format. This angered Nintendo, who created a virtual monopoly with the cartridge-based games they produced for all of their leading video game systems. Ironically, Nintendo was even under investigation by the U.S. Government over alleged price manipulating tactics that came to light during this same time period.
Nintendo’s management team liked the idea of the Super Disc format, but executives at the time were enraged by Sony holding the rights to the technology. This caused management to send senior executives to Europe to attempt to negotiate a better deal with Dutch electronics giant Philips. Meanwhile in 1991, Sony had announced plans to create a Nintendo Playstation system that would be a combination system featuring the SNES and the newly created CD-ROM add-on. When word got out that Nintendo was secretly also working with Philips, one of Sony’s main rivals, Sony did the unthinkable. With Nintendo confidently assuming they had the upper hand, Sony quickly pulled out of the deal and refused to work with Nintendo. Sony then announced that they would work on their own next generation video game system. Nintendo thought nothing of it because Nintendo knew the home video game business, while Sony was a new player to the market.
It would take until 1994 for Nintendo to learn that they had made a grave mistake, as the original Sony Playstation system was on display and ready to launch with a retail price of just $299. Nintendo then realized that they created their own nemesis, who still today continues to steal market share away from Nintendo with their ongoing line of Playstation branded video game consoles. The Sony Playstation 5 is set to launch sometime in the year 2021, and excitement is already mounting.
It would take until the year 2015 for the only known Nintendo Playstation prototype system to surface. The system cannot do much, but it can play Japanese Super Nintendo (called the Super Famicom in Japan) games on it.
That said, given the sordid history of the iconic device and the fact that it is the only known prototype of the Nintendo Playstation in existence, the auction is expected to fetch six figures or more! Those in the antiques and collectibles trade like myself know how hard it is to appraise one-of-a-kind esoteric items like this. That said, with the rise of video games being seen as valuable collectibles as of late, this kind of auction has the buzz to generate a lot of publicity. I will be sure to do a followup article on the results. This is one item Nintendo wished would stay buried.

Shawn Surmick has been an avid collector since the age of 12. He currently resides in his hometown of Boyertown, Pa., and is a passionate collector of antiques and collectibles. His articles focus on various topics affecting the marketplace.