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The question is how the CD format would have affected the games the N64 had in real life. Long load times would be a real detriment to games like Mario 64, and big open areas like Hyrule Field also benefited from the cartridge format. Another question is how much the N64 would cost if designed to play CDs, but the games themselves would have been cheaper, so that would even out.

Square sticks with Nintendo, so Final Fantasy 7 and most of the other big JRPGs remain Nintendo exclusive and it is Nintendo that gets that big FF7 boost instead of Sony. That alone in my opinion would make the N64 the winner of the generation, as it was the release of FF7 that pushed the PS1 ahead of the N64. Many of the big 3rd party games would be multiplat like Metal Gear and Resident Evil, and they would often be much better on the N64 which was 2-3 times more powerful than the PS1 in pretty much every aspect.

If the exclusives the N64 had in real life stay largely the same I can't see a scenario in which the N64 doesn't outsell the PS1. The PS1 would loose a ton of its momentum and that same boost would just transfer to the N64, and without the storage advantage of CDs the huge difference of power between the two systems would be extremely obvious to everyone. I think the PS1 would sell slightly better than the SNES under that scenario on the strength of Sony's marketing at the time and I think they'd still win Europe, but the N64 would sell 3DS-PSP numbers. Nintendo wouldn't have the marketing chops to push the N64 over the 100 million mark, but the strength of the games would be more than enough to push the system to record levels.