3" CDs were among the first CD singles to be released, they kept the distinction between album and single and were widely welcomed by the record buying public. They were however doomed.
Shortly after they bought CBS, Sony announced that the "extra expense" of making CD players that could accomodate 3" CDs was unnacceptable and, being one of the largest makers of both players and discs, they easily killed the format.
With the release of Minidisc only a few years later a much more likely reason for Sony's actions can be seen.
The 3" format is now highly collectable as the numbers pressed in the late 80s were very small.
Ironically most new CD players, including Sonys, will play 3" CDs.