Sony wanted too big a portion of the rights for Nintendo's liking, so Nintendo ditched them despite there already being an existing prototype and went to Philips. Sony probably wanted their work to come to something, so upon offering a partnership to Sega and getting refused, they just said "screw it" and made their own console with the disc drive. Sony of course got all the rights to this and sold over 100 million while the N64 ended up with a third of that. So yeah, it was low-key the biggest mistake Nintendo ever made but a great decision for Sony. I'm inclined to put more blame on Nintendo for it since they were so quick to abandon Sony for Phillips when they didn't like Sony's terms (and we all know how great the Phillips partnership turned out). Sony was kinda greedy to request such a large portion since the console was half SNES, but their actions after Nintendo broke the partnership were perfectly reasonable. With their ambition, they probably would've ended up making their own console eventually anyway, though the climate could have been completely different if the collaboration had been released since not having disc format was the thing that really hurt Nintendo in that era.