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N64 would've won that generation, probably fairly easily at that and Squaresoft likely would not have defected.

Mario 64 + GoldenEye + Zelda: Oot + Final Fantasy VII + Resident Evil series (multi-plat)? Etc. etc. etc.

Game over for anyone else. They could have still used cartridges for certain Nintendo games ... the Saturn had both a cartridge slot and CD drive for example. It didn't have to be a one or other choice. 

The system would've probably been $50 more expensive at launch, but the games would've been cheaper too, so I think most consumers would take that trade off.