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ECM said:
A couple of things:

*Sticking with carts was a huge, tactical, error, since carts cost *a lot* more, per copy, than CDs at the time which made it cost-prohibitive to make a game on N64.
*Sticking with carts was a huge, tactical, error, since you could fill a CD with reams of useless, CGI, garbage that wowed the mindless masses, i.e. Nintendo mis-read (or didn't much care about) their audience beyond pre-teens.
*The N64 hardware, at the time, was cutting edge tech that was extremely difficult for third parties to come to grips with since it was the first machine capable of 'real' 3D graphics, thus increasing dev costs dramatically when cart prices were already making publishers gag.
*Nintendo's marketing was *feeble* in the post-SNES era. They had no idea how to mount a successful campaign to challenge SONY, instead sticking with the tried and true 'all ages' mentality that had seen them in good stead through two generations of hardware.

Beyond that, the damage was done.

It didn't really matter that the GameCube showed up with hardware that was (at least) on par with the other machines. They were written off as the kiddie company, an image they carried with them from the SNES years that SEGA pinned on them via genius marketing campaigns--Nintendo also did themselves no favors with things like the Mortal Kombat debacle.

(In a way, SEGA's most lasting gift to SONY and MS was branding Nintendo un-hip, for seemingly all time, in the mind's of the teen-to-20-something market.)

That's basically the condensed overview of Nintendo's descent into irrelevance, prior to the Wii. (I worked on the 'journalist' side of things during that era, and I can tell you from innumerable talks with devs and pubs that the kiddie thing and the cart thing is what scared most devs and pubs off.)

That's true, but I think that if Nintendo had played things right in the N64 days they could have easily shaken off Sega's branding. 

Yamauchi didn't know what he was doing. He was too arrogant to change. 



 Tag (Courtesy of Fkusumot) "If I'm posting in this thread then it's probally a spam thread."