Alternate history: Sony don't join the console race

[Vinther1991]

Interesting. Sega would have looked at Nintendo as the biggest threat instead, so they would not have made the same dumb mistakes up to the launch.
Even before the announcement of PS1, Sega had planned the SH2 dual CPU architecture, but only with one video display processor. Almost no third party games used the capabilities of VDP2 anyway, so it would have mainly affected the graphics of Sega's own titles. The unusual architecture of the Saturn got it the reputation of being difficult to develop for, however, it is only a half-truth, as it did not really affect its library, the Saturn got more than 1,000 games (most of them just stayed in Japan), that is almost three times as many as the N64. It is more than the Gamecube, the Xbox, any other Sega console, and almost as many as the SNES. So clearly, this was not the reason the Saturn failed. Also, while it was challenging to uptimize 3D games for it, as that would require both VDPs, it was by far the easiest system to make 2D games for that generation.
Had Sony not been there, the Saturn may have been without the VDP2, which would have made it cheaper, simpler, less capable, but it would only have affected games that relied heavily on their capabilities for background rendering (NiGHTS, Panzer Dragoon), and not so much Tomb Raider, Quake, Resident Evil, Duke Nukem, Hexen. Alternatively they would have awaited the N64 a bit more, and decided to include the VDP2 anyway to compete with that, or use something even stronger.

Either way, I think Sega would have won the generation handedly, provided Nintendo went with the same hardware they ended up with. The N64s limitations were worse than the Saturn's. In this universe Resident Evil (though RE2 would still get ported to N64), Tomb Raider, Grandia, Croc, Castlevania: SotN, Suikoden are now Saturn exclusives. The Tekken series would most likely be Saturn exclusive too, since it was more tailored for fighters than N64. Metal Gear Solid probably too, if it did not manage to come out on 3DO; the Saturn would simply be easier to covert the game to, as a disc-based system. Final Fantasy is the more interesting. Square probably made a pretty good deal with Sony, that SEGA probably couldn't compete with. Square also had no history of making games for SEGA hardware. On the other hand FFVII wouldn't be suited for N64. My guess is the game would have been completely different, a lot less ambitious, but an N64 exclusive, same for FFVIII-FFIX. The series would not have grown as much as it ended up doing.

My guess for hardware sales would be:
Saturn - 70 million
N64 - 50 million

PS1 managed to draw in a new audience, which would not enter console gaming without it, they may have played on PC instead.

The sixth gen would have been very competitive. The GameCube would have been more or less as it ended up being, hardware-wise. The Dreamcast would have come out in 2000 instead. Microsoft would not have entered the console market, as they would not perceive Nintendo or Sega as threats the same way they did with Sony, plus PC gaming would be at an even better state. Sega and Nintendo would have remained competitors to this day, but the console market would be smaller, with more PC gamers instead.