The loss of Square, and thus Final Fantasy, was indeed what tipped the scales in Sony's favor, at least in the U.S. The PS1 was selling rather poorly from launch through to the end of 1996. By the end of its first full year on the market it had managed to sell just shy of 2.6 million units. Even with the console market being smaller back then, that's still a rather poor performance. Its relatively high launch price probably contributed to that, but even a cut from $300 to $200 only improved sales from Wii U levels to GameCube levels.

Meanwhile, despite coming out a year later, the N64 was quickly catching up with the PS1.  Despite not being released until the last week of September that year, the N64 managed to see almost as well in 1996 as the PS1 did for the whole year (1.97M to 1.99M), and it was the overall sales leader for the January-August period in 1997 (1585k to 1275k, approximately). Through its first 12 months, the N64 was at the time the fastest-selling console ever in the U.S. By summer of 1997, the N64-PS1 gap had shrunk to less than 300k, putting Nintendo within striking distance of this upstart that began its life as a planned CD add-on for the SNES.

But FFVII was released in September 1997 and it caused PS1 sales to skyrocket. That was the big tipping point, the thing that showed gamers exactly what the PS1 had to offer. The N64 still did decently in the U.S., and actually outsold the SNES by a bit, but it ended up in a distant second place. But the PS1 having a vastly bigger library, thanks to superior third-party support borne out of having a CD format (CDs being far cheaper and holding way more data than N64 carts), was what made the difference, but it took FFVII to really draw gamers' attentions to the PlayStation platform.

It's harder to say if FFVII was a deciding factor in Japan and Europe, though. In Japan, it seems that the PS1, despite having a weak start, improved considerably and was already far outselling the N64, for several months before FFVII was released. In 1996, the PS1 had sold nearly 2.7M units in Japan, which relative to the size of the market then was pretty decent, though not amazing. FFVII was a huge system-seller, with nearly 180k PS1s sold the week of its launch, but it seems the general shift of third-party support from Nintendo to Sony was already having a big impact before FFVII's release, and it just kept going from there. FFVII was more of a contributing and potential accelerating factor rather than being the singular thing that opened the floodgates like in the U.S.

As in the U.S. & Japan, the PS1 seems to have had a slow start in Europe as well, with a weak launch and a weak 1996, but shipment figures indicate that sales in 1997 rebounded big-time earlier in the year, well ahead of FFVII's launch. It's entirely possible that when the home computer market collapsed in the mid 90s, gamers in Europe began migrating en masse to consoles, saw the PS1 had more to offer in general, and as a result Europe became "PlayStation Country." Nintendo had never been a big factor in Europe to begin with, as the console market in the region was absolutely tiny in the 8-bit & 16-bit eras compared to what it is today (the PS1 sold more than the NES, SNES, Master System, and Mega Drive combined), and with having inferior third-party support and consequently a much smaller library, Nintendo wasn't able to take advantage of Europe's shift from home computers to game consoles. Overall, FFVII doesn't appear to be a contributing factor to Sony's dominance of Europe in the fifth generation.

The loss of Square, and thus Final Fantasy, was indeed what tipped the scales in Sony's favor, at least in the U.S. The PS1 was selling rather poorly from launch through to the end of 1996. By the end of its first full year on the market it had managed to sell just shy of 2.6 million units. Even with the console market being smaller back then, that's still a rather poor performance. Its relatively high launch price probably contributed to that, but even a cut from $300 to $200 only improved sales from Wii U levels to GameCube levels.

Meanwhile, despite coming out a year later, the N64 was quickly catching up with the PS1.  Despite not being released until the last week of September that year, the N64 managed to see almost as well in 1996 as the PS1 did for the whole year (1.97M to 1.99M), and it was the overall sales leader for the January-August period in 1997 (1585k to 1275k, approximately). Through its first 12 months, the N64 was at the time the fastest-selling console ever in the U.S. By summer of 1997, the N64-PS1 gap had shrunk to less than 300k, putting Nintendo within striking distance of this upstart that began its life as a planned CD add-on for the SNES.

But FFVII was released in September 1997 and it caused PS1 sales to skyrocket. That was the big tipping point, the thing that showed gamers exactly what the PS1 had to offer. The N64 still did decently in the U.S., and actually outsold the SNES by a bit, but it ended up in a distant second place. But the PS1 having a vastly bigger library, thanks to superior third-party support borne out of having a CD format (CDs being far cheaper and holding way more data than N64 carts), was what made the difference, but it took FFVII to really draw gamers' attentions to the PlayStation platform.

It's harder to say if FFVII was a deciding factor in Japan and Europe, though. In Japan, it seems that the PS1, despite having a weak start, improved considerably and was already far outselling the N64, for several months before FFVII was released. In 1996, the PS1 had sold nearly 2.7M units in Japan, which relative to the size of the market then was pretty decent, though not amazing. FFVII was a huge system-seller, with nearly 180k PS1s sold the week of its launch, but it seems the general shift of third-party support from Nintendo to Sony was already having a big impact before FFVII's release, and it just kept going from there. FFVII was more of a contributing and potential accelerating factor rather than being the singular thing that opened the floodgates like in the U.S.

As in the U.S. & Japan, the PS1 seems to have had a slow start in Europe as well, with a weak launch and a weak 1996, but shipment figures indicate that sales in 1997 rebounded big-time earlier in the year, well ahead of FFVII's launch. It's entirely possible that when the home computer market collapsed in the mid 90s, gamers in Europe began migrating en masse to consoles, saw the PS1 had more to offer in general, and as a result Europe became "PlayStation Country." Nintendo had never been a big factor in Europe to begin with, as the console market in the region was absolutely tiny in the 8-bit & 16-bit eras compared to what it is today (the PS1 sold more than the NES, SNES, Master System, and Mega Drive combined), and with having inferior third-party support and consequently a much smaller library, Nintendo wasn't able to take advantage of Europe's shift from home computers to game consoles. Overall, FFVII doesn't appear to be a contributing factor to Sony's dominance of Europe in the fifth generation.