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There were a few reasons why CD's were not chosen:
- The noise it can make, some games made the PS1 sound like a circular saw cutting wood.
- Loading times were a concern when pick up and play were top priority for Nintendo.
- The ease of piracy since CD's were available everywhere. In Colombia, where I am from, all ps1 games we purchased were pirated ($1 per disc).
- Long term durability. Cds as well as the CD drives don't last much with constant use and are in need of repairs. Nintendo had a mentality that you have a game you play it almost forever.
- Nintendo wanted to make a game console, not a multimedia device