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Like I said in my first post, the cost of the system would be a factor, but the fact that the games would be so much cheaper would largely negate that. N64 games were ridiculous in how expensive they were.

It seems to me that Nintendo could have gotten away with using cartridges instead of CDs if they hadn't screwed over Sony with the SNES disk drive. If there was no Playstation third parties would just have to figure out how to work with the N64. The Saturn would likely have been even less viable as a 3d system than it was in real life, since they hastily changed the hardware to be 3d capable in response to the Playstation. Developers would just have to figure out what Factor 5 did with its audio compression and Capcom did with Resident Evil 2. It would be more difficult, take more time and money, but there would be no other option for them. Nintendo made two huge blunders in the 90s, screwing Sony over and going with cartridges. They could have gotten away with making one of those blunders as long as they didn't do the other, but by doing both they effectively killed their home console line.

Nintendo has always had this weird issue with worrying so much about losing out on relatively small sources of income that they end up losing millions for the sake of a few bucks. The deal they made with Sony was a bad deal, but the disk drive was never going to be a big hit anyway if all the Sega add-ons of the era are anything to go by, so they would not lose much by just sticking it out. Piracy was a problem, but by worrying so much about it they handicapped their system and sold tens of millions of units less, a far greater loss than piracy could ever cause them. They repeated that mistake to a lesser extent with the Gamecube, using those mini-disks in order to combat piracy and losing out on more third party support because of it. And in recent years they've had that stupid Youtube policy where they've been penny-pinching youtubers not realizing that they were strangling free advertising for their products. Talk about not being able to see the forest for the trees.