Firstly, Third parties could have easily said "stuff you Nintendo" and moved their development to Sega, for example. Why did they choose Nintendo? Because they controlled the previous generation. In other words, their brand was stronger than Sega's.
The N64 was a similar situation to the SNES. It launched after the competition, they had the same braindead relationship with third parties, but it failed. The lack of Japanese developers was a huge problem. Had the N64 taken off like the Wii did in Japan, then developers would have followed it. But the launch titles simply weren't there. I agree with you that launch titles are important, but if Nintendo had have launched with (say) FF7 along with the other three games, the scenario could have been quite different. Mario 64 didn't click with the Japanese like it did in the US, which goes a large way to explaining how the N64 went so well in USA but flopped in Japan.
I'm sure the lack of launch games for the N64 was a major problem. But the success in America despite launching with only 3 games shows that there is more than the variety of games in the process. I'm not saying it doesn't matter at all (that's where the "third party development spiral of doom" comes in). But how many launch titles did the DS have?
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