It failed because of the mini-disc. Ever since the start of the 5th generation they tried to go to a different approach. This is the price they paid. By releasing a very powerful console; but with a storage medium that only had fraction of the competitors storage medium. Developers only had 32-64MB to work with, while others had at the time an astonishing 700MB to work with on the PS1.
Same goes for the GameCube and PS2. Developers couldn't make their games with just 1.5GB so they went to the PS2 and made games without any real limitations since they worked with a storage medium that gave thm 4 to 8G of memory to work with. This limitation in turn alienated developers who then flocked to the PS2; which then ceased thirdparty support of the GameCube.
Plus one other possible reason why it failed was the lasting impression the previous president of Nintendo had left on japanese developers. During the final years of his presidency, he got into some debates with some of the most popular dev teams in japan. One of them was with Squaresoft. Because they couldn't come to an agreemant with the N64s storage. Square canceled FFVII; the game that could've been on the N64. So how it got released it on the PS1.
Mr. Iwata had to clean up all the mess his predecessor left by patching things up with the companies Yamauchi fought with. If it wasn't for him, the GC would have gotten even less third support. No Crystal Chronicles or anything.
