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So, what actually happened...?
In 1988, Nintendo was the biggest name in video games pretty much across the entire world. Both the Nintendo Family Computer (Japan) and the Nintendo Entertainment System (pretty much everywhere else) were still selling extremely well in their territories and competition was nearly nonexistent.
Nearly.
By 1988, there were two technologically superior challengers in the marketplace: NEC's PC Engine and Sega's Mega Drive (or TurboGraphx-16 and Genesis, respectively, in North America) 16-bit consoles were on the shelves and while the Famicom/NES were still technically outselling them (although, in Japan, that didn't last very long, but that's a whole different story), it was clear that these higher-powered systems were the future and Nintendo couldn't wait forever if they intended to catch up.
Nintendo began work on designing the Super Famicom (or Super Nintendo Entertainment System everywhere else) in 1988 and inside the casing was a sound chip developed by Sony's own Ken Kutaragi. He's important, remember him. This led to a joint collaboration between the two companies to create a CD-Rom drive add-on for the upcoming Super NES. It was to be called the Nintendo Play Station. And, yeah, there's a space in there.
Then things went haywire.
Relations between the two companies began to sour, as it can do with businesses, when problems arose - and you're never gonna believe this - over money. The exact details aren't important, but essentially, not only did Sony retain the right to make their own Sony-branded system that played both discs and SNES games down the road, but Sony collected royalties and retained the rights on any software developed on their hardware. Basically, it was a bad deal for Nintendo... who really should have maybe known that before they signed.
It's fairly interesting that this CES was the last time the show was held both in the summer and in Chicago. For it was at this event where things really went bananas, and set in motion events that would forever change the video game industry.
