The story behind the Philips CD-i actually begins with Nintendo. Back in 1988, Nintendo struck a deal with Sony to manufacture the sound chip for the then-upcoming Super Nintendo Entertainment System. Sony would later use this alliance with Nintendo to bolster support for its own planned console -- code-named the "Play Station" -- which would play Super Nintendo cartridges in addition to Sony's own CD-ROM games. As a part of this agreement, Sony was responsible for developing a CD-ROM add-on system for the Super Nintendo. The plan called for full cross-compatibility: SNES cartridges would play on Sony's Play Station, and Sony's CD-based games would be compatible with the Super Nintendo's CD-ROM peripheral.
It was at this point that Sony, through clever legal wrangling, secured the rights to both license and retain publishing profits derived from the dual-compatible CD-ROM software on the Super Nintendo and Play Station. Nintendo, having a history of being notoriously strict with its control over software licensing, did not react to this news very well. In fact, Nintendo decided to end its agreement with Sony to manufacture of the SNES CD-ROM hardware right then and there.
This, however, was news that Sony would not hear for quite a while.
Sony, oblivious to the fact that Nintendo was displeased with the agreement between the two companies, first announced the Play Station at the 1991 Summer Consumer Electronics Show. Announcing full cross-compatibility with the Super Nintendo, Sony boasted that its CD-based games would be available for license to the software industry at large, in stark contrast with Nintendo's own brand of strict licensing practices and quality control.
An unreleased peripheral for a Nintendo system? Shocking, but true!
The very next day, Nintendo announced its plans for a Super Nintendo CD-ROM attachment...developed by Royal Philips Electronics, Sony's rival in the electronics field.
Nintendo's deal with Philips was similar