This is basically the moment that changed the game industry forever as far as from 1985 onwards is concerned.
If N64 was CD-based, Final Fantasy VII and Dragon Quest VII would've been N64 exclusive and N64 would've IMO outsold the NES due to the industry becoming larger and Playstation would've fizzled out without the overwhelming majority support from 3rd parties.
Against Mario 64, Final Fantasy VII, Zelda: OoT, GoldenEye, Dragon Quest, Banjo-Kazooie, Star Wars exclusives, and other third party games like Resident Evil 1/2/3, Street Fighter, etc. there's no way Sony could've touched Nintendo that gen, Nintendo's 1st party was on top of their game, but Rare was also killing it, and then Squaresoft was also doing incredible. Nothing could stand against that tsunami.
IMO I actually believe if this is how it unfolded there wouldn't have been a Playstation 2, I think Nintendo if they played their cards right would've beaten them that badly. I think effectively you would have this:
N64 Exclusive: Super Mario 64, GoldenEye, Final Fantasy VII-IX, Zelda: OoT, Dragon Quest VII, Zelda: Ocarina of Time, Perfect Dark, Banjo-Kazooie, Star Wars games, NBA Courtside ft. Kobe Bryant, Ken Griffey Jr. MLB, Final Fantasy Tactics, Bushido Blade, Pokemon Stadium games.
Playstation Exclusive: Crash Bandicoot, Gran Turismo, Spyro the Dragon, Parappa The Rapper, NFL GameDay Jumping Flash, Battle Arena Toshinden.
Multiplat: Tomb Raider, Resident Evil, Metal Gear Solid, Tekken, Ridge Racer, Tony Hawk Pro Skater, Silent Hill, Castlevania, Street Fighter.
IMO developers would not make Playstation exclusives because the sway of the N64 would be too large to ignore so deals that Sony enjoyed like Tomb Raider exclusivitiy from TR2 onwards and Metal Gear Solid exclusivity and all that IMO don't happen.