The inception of what would become the released PlayStation dates back to 1986 with a joint venture between Nintendo and Sony. Nintendo had already produced floppy disk technology to complement cartridges, in the form of the Family Computer Disk System, and wanted to continue this complementary storage strategy for the Super Famicom. Nintendo approached Sony to develop a CD-ROM add-on, tentatively titled the "Play Station" or "SNES-CD". A contract was signed, and work began. Nintendo's choice of Sony was due to a prior dealing: Ken Kutaragi, the person who would later be dubbed "The Father of the PlayStation", was the individual who had sold Nintendo on using the Sony SPC-700 processor for use as the eight-channel ADPCM sound set in the Super Famicom/SNES console through an impressive demonstration of the processor's capabilities.
Kutaragi was nearly fired by Sony because he was originally working with Nintendo on the side without Sony's knowledge (while still employed by Sony). It was then-CEO, Norio Ohga, who recognised the potential in Kutaragi's chip, and in working with Nintendo on the project. Ohga kept Kutaragi on at Sony, and it was not until Nintendo cancelled the project that Sony decided to develop its own console.
Sony also planned to develop a Super NES-compatible, Sony-branded console, but one which would be more of a home entertainment system playing both Super NES cartridges and a new CD format which Sony would design. This was also to be the format used in SNES-CDs, giving a large degree of control to Sony despite Nintendo's leading position in the video gaming market.
The product, dubbed the "Play Station" was to be announced at the May 1991 Consumer Electronics Show (CES). However, when Nintendo's Hiroshi Yamauchi read the original 1988 contract between Sony and Nintendo, he realised that the earlier agreement essentially handed Sony complete control over any and all titles written on the SNES CD-ROM format. Yamauchi decided that the contract was totally unacceptable and he secretly cancelled all plans for the joint Nintendo-Sony SNES CD attachment. Instead of announcing a partnership between Sony and Nintendo, at 9 am the day of the CES, Nintendo chairman Howard Lincoln stepped onto the stage and revealed that Nintendo was now allied with Philips, and Nintendo was planning on abandoning all the previous work Nintendo and Sony had accomplished. Lincoln and Minoru Arakawa had, unbeknownst to Sony, flown to Philips' global headquarters in the Netherlands and formed an alliance of a decidedly different nature—one that would give Nintendo total control over its licenses on Philips machines.
After the collapse of the joint-Nintendo project, Sony briefly considered allying itself with Sega to produce a stand-alone console. The Sega CEO at the time, Tom Kalinske, took the proposal to Sega's Board of Directors in Tokyo, who promptly vetoed the idea. Kalinske, in a 2013 interview recalled them saying "that’s a stupid idea, Sony doesn't know how to make hardware. They don’t know how to make software either. Why would we want to do this?". This prompted Sony into halting their research, but ultimately the company decided to use what it had developed so far with both Nintendo and Sega to make it into a complete console based upon the Super Famicom. As a result, Nintendo filed a lawsuit claiming breach of contract and attempted, in US federal court, to obtain an injunction against the release of what was originally christened the "Play Station", on the grounds that Nintendo owned the name. The federal judge presiding over the case denied the injunction and, in October 1991, the first incarnation of the aforementioned brand new game system was revealed. However, it is theorised that only 200 or so of these machines were ever produced.
By the end of 1992, Sony and Nintendo reached a deal whereby the "Play Station" would still have a port for SNES games, but Nintendo would own the rights and receive the bulk of the profits from the games, and the SNES would continue to use the Sony-designed audio chip. However, Sony decided in early 1993 to begin reworking the "Play Station" concept to target a new generation of hardware and software. As part of this process the SNES cartridge port was dropped and the space between the names "Play Station" was removed becoming "PlayStation", thereby ending Nintendo's involvement with the project. According to a Sony engineer, all work on the console from the time of the partnership with Nintendo was eventually scrapped, and the PlayStation design was restarted from scratch. Sony's North American division, known as Sony Computer Entertainment America (SCEA), originally planned to market the new console under the alternative branding "PSX" following the negative feedback regarding "PlayStation" in focus group studies. Early advertising prior to the console's launch in North America referenced PSX, but the term was scrapped before launch.
According to SCE's producer Ryoji Akagawa and chairman Shigeo Maruyama, there was uncertainty over whether the console should primarily focus on 2D sprite graphics or 3D polygon graphics. It was only after witnessing the success of Sega's Virtua Fighter in Japanese arcades that "the direction of the PlayStation became instantly clear" and 3D polygon graphics became the console's primary focus.
Unlike Sega, Sony had no arcade division from which to draw console-selling ports, or any in-house development to speak of. To solve this problem, Sony acquired studios such as Psygnosis and signed exclusivity deals with hot arcade publishers Namco and Williams Entertainment.
Industry hype for the console spread quickly, and in early 1994 GamePro reported that "many video game companies [feel] that in the near future, the video game platforms to contend with will be from Nintendo, Sega... and Sony." [emphasis in original]
The PlayStation was released in Japan on 3 December 1994, North America on 9 September 1995, Europe on 29 September 1995, and Oceania on 15 November 1995. The console was an immediate success in Japan, selling over 2 million units within its first six months on the market. In the US, 800,000 were sold in 1995 (i.e. four months on the market), giving the PlayStation a commanding lead over the other consoles of its generation,[note 2] though it was still being outsold by the older Super NES and Sega Genesis. The launch price in the US market was US$299 and Sony enjoyed a very successful launch with titles of almost every genre, including Battle Arena Toshinden, Warhawk, Air Combat, Philosoma, Ridge Racer and Rayman. Unlike the vast majority of gaming consoles of the time, the PlayStation did not include a pack-in game at launch. Sony reported strong software sales in the months following launch, with an attach rate of 4:1.
Then Microsoft chairman, Bill Gates, preferred Sony's console to the competition from Sega, saying "Our game designer likes the Sony machine." Microsoft would later compete with Sony with its Xbox console. In a special Game Machine Cross Review in May 1995, Famicom Tsūshin would score the PlayStation console a 19 out of 40. The staff of Next Generation reviewed the PlayStation a few weeks after its North American launch. They commented that while the CPU is "fairly average", the supplementary custom hardware such as the GPU and sound processor is stunningly powerful. They particularly praised its focus on 3D, and also remarked positively on the comfort of the controller and the convenience of the memory cards. Giving the system 4 1/2 out of 5 stars, they concluded, "To succeed in this extremely cut-throat market, you need a combination of great hardware, great games, and great marketing. Whether by skill, luck, or just deep pockets, Sony has scored three out of three in the first salvo of this war." An advertisement slogan used in marketing the console was, "Live in your world. Play in ours." It is stylised as, "LIVE IN YUR WRLD. PLY IN URS." Another briefly used advertising campaign was titled "You Are Not Ready" or "U R NOT E." Sony's CCO Lee Clow explained that "it's the ultimate challenge. Gamers love to respond to that tag line and say 'Bullshit. Let me show you how ready I am.'"
One of the key factors in the PlayStation's success was Sony's approach to third party developers. Whereas Sega and Nintendo took an isolationist approach, focusing on first party development while generally leaving third party developers to their own devices, Sony took efforts to streamline game production by providing a range of programming libraries which were constantly updated online, organising third party technical support teams, and in some cases giving direct development support to third party companies. At the close of 1996, there were approximately 400 games in development for the PlayStation, as compared to approximately 200 games in development for the Saturn and 60 for the Nintendo 64.
While the Sega Saturn was marketed towards 18 to 34 year-olds, the PlayStation was marketed roughly, but not exclusively, towards 12 to 24 year-olds. Both Sega and Sony reasoned that because younger players typically look up to older, more experienced players, they would be drawn in by advertising targeted at teens and adults. Additionally, Sony found that adults are best targeted by advertising geared towards teenagers; according to Lee Clow, "One of the first things we resolved early on was that everyone is 17 when they play videogames. The young people look up to the best gamer who is usually a little older and more practiced and talented. Then there are people who start working and grow up, but when they go into their room and sit down with their videogames, they're regressing and becoming 17 again." Initially PlayStation demographics were skewed towards adults, but after the first price drop the audience began broadening.
In 1996, the high demand for PlayStation games contributed to Sony's decision to expand their CD production facilities in Springfield, Oregon, increasing their monthly output from 4 million discs to 6.5 million discs. PlayStation sales were running at twice the rate of Saturn sales, and dramatically increased their lead when both the PlayStation and Saturn dropped in price to $199 in May, in large part because some retailers (such as KB Toys) did not stock the Saturn. The PlayStation was outselling the Saturn at a similar ratio in Europe as well during 1996, with an accumulated 2.2 million consoles sold in the region by the end of the year. Sales figures for PlayStation hardware and software only increased following the launch of the Nintendo 64.
The PlayStation took more time to achieve dominance in Japan. After the PlayStation and Saturn had been on the market for nearly two years, Sony Computer Entertainment president Teruhisa Tokunaka said the competition between them was still "very close", and that neither console had yet held the lead in sales for any meaningful length of time.