Mini-timeline:
POD:
Taiyo Yuden fails to develop a method that makes CD-R compatible with CD-ROM or Audio CD, causing Sony-Phillips to abandon it.
Some work is done on CD-MO and CD-E (i.e. CD-RW) technology but in 1988 it's simply too early, and the project is put aside.
Random butterflies result in the RIAA being slightly more successful in lobbying against the DAT format. Sony decides this is more trouble than it's worth, and pulls back to build its own lobby network. As a result they do not buy CBS Records.
Philips, accepting that they can't make CD-R work with regular CD-ROM/Audio work together with Sony on their MiniDisc project (based partially on the CD-MO). As a result of the DAT fall-out Sony works to make the MiniDisc able to record in a lossless format.
The MD, then, is designed with three design goals: lossless recording for professionals, rewritable to replace diskettes, and with a music compression system to compete with portable CD players.
As a result the designers pattern the MD more on a hard disk than the CD, resulting in the original MD format being released with a capacity of 260 MB (instead of 177 MB, OTL) which works out to either 115 minutes compressed (ATRAC), or 30 minutes lossless audio[1].
ATL ATRAC is somewhat better due to more resources thrown at it. Original ATRAC at 292 kbit/s was below "CD quality", the ATL version is comparable to CD quality. ("CD quality" simply meaning whether the average listener notices the difference. IOTL they did, in the ATL they do not.)
This results in a design similar to, although less advanced than, the
Hi-MD, allowing data, audio (lossless or ATRAC in a special area so that non-computer players can read them), faster than realtime encoding/transfer, linear PCM recording & ATRAC recording
MiniDisc is released initially by Sony in 1991, with the new Walkman-MD, the MD Deck (for home use, also attaches to a computer), the MD/CD Deck (to rip CDs onto MDs; also attaches to a computer), and finally the Walkman MD-Recorder (duh, it records).
Panasonic, Sharp, Philips et al soon release competing products and everybody expands MD into other systems (cars, home audio, boomboxes, etc…).
Sony enters into talks with a number of computer makers, and MD is soon found on the Mac, Amiga, FM Towns, and IBM PC clones as well as the SNES MD[2]. By replacing the diskette MDs purpose is clearer to consumers than OTL, and is thus more widely embraced.
Sony applies their audio expertise to computers, releasing the Sony CyberDeck for audio professionals—it comes with a CD and MD drive and uses the Fujitsu FM Towns operating system (think Japanese Amiga-analogue).
By the mid 1990s portable MD players have mostly supplanted portable CD players, MD/CD Decks of various sorts are common for home audio (so as to transfer CD music onto MDs), MD Decks in computers are common, and the new Ultra Nintendo is coming out with a MD drive instead of CD-ROM or cartridge.
Zip never had a market opening, DCC was killed as Philips remained a Sony ally, and DAT never got far resulting in professional audio relying on MD recorders.
CDs remained the king of albums but lost ground on the computer front and the new MiniDisc-II, with 780 MB of capacity (released in 1996, backward & forward compatible[3]) is Sony-Philips answer to CD Audio, Video CDs, and CD-ROM.
I don't know what happens with DVDs with the lesser success of CDs. Perhaps an early 2000s introduction of an MD able to hold a couple GB but using quality video compression to achieve a 480p picture. This could delay HD, but result in the spread of 480p. Thus HD and HD-MD might be delayed until 2010 or so, resulting in uniform 1080p standards and a slightly later (in the USA) ending of analogue television transmission.
[1] I can't seem to find an easy "when was this lossless audio compression scheme released" source, but it appears that Shorten (SHORTEN) was around as early as 1994 although it wasn't as good as FLAC. Sony licensing that would give MD 50-70 minutes of near-identical to lossless audio quite early on.
[2] ITTL Nintendo talks to Sony instead of flipping out (because, why not?), and they agree both on a fairer deal for Nintendo and switching to the MD format. The Super Nintendo MiniDisc System has an attach rate similar to NEC's CD attachment for the PC Engine, and as such isn't terribly successful. It will however result in a Sony/Nintendo collaboration on the Ultra Nintendo (née N64) hardware including a MiniDisc-II drive.
[3] Forward compatibility requires formatting roughly half of the the MD-IIs storage space as an "MD" area, dropping capacity to one 260 MB original MD area and one 390 MB MD-II area.
) was a variant called MD Data, but apparently it had problems writing to ordinary audio MDs. I suppose if this problem did not exist, it might be one less drawback. (Apparently the newer Hi-MDs do not have this problem.) I think for them to be successful, it seems one might need to get rid of the ZIP discs as well, or at least delay them or make them less successful.