How did ff vii change the industry?

It was the sixth Generation: arguably the peak of liscensed games. It was also probably the Nintendo console that the closest to it's competition tech wise, with only discs being a issue. No motion, no pad, no carts. 

Most notably CG cutscenes being used to help tell the story. In a game...something on this scale hadn't been done before. It was 1997 when it came out. Work on CG probably started in 94. To put this into perspective the first full length CG movie, Toy Story debuted in 1996. Who would have thought to use this new, emerging tech in a videogame? Now most games use CG cutscenes at least once. FFVii legitimized CG in videogames and set a standard for many games to follow. I could say more but I'm tired, need to get some shuteye 😴

More successful? Likely.

Better System? I kind of doubt it. The N64 (like almost all Nintendo systems) are very pick up and play friendly. While the Playstation 1 aged absolutely terribly, you can pop in OoT and be met with fair graphics and good load times.

That's not true. Nintendo had it's dreamteam that Nintendo would release their games on N64, but being deliberately hard to program isn't the case because Nintendo had been the one taking the biggest hit. N64 had certain design flaws that made it to have a huge bottleneck.

This is true, but only on the FIFA and COD. There are lots of people that want something else than just your regular COD and FIFA, just like there are people that only care about those two. PS4 was what these people wanted, while none of the three was what everyone else wanted.

The 64DD discs were the same size as the carts were. DD was made to cut costs of the medium to make it more appealing to third parties and more profitable for Nintendo.

This is how it looks if you were born yesterday and don't really know what the devices hold inside. N64/PSX/(PS2) had the same architecture. Sixth gen had had PS2 being similar to PSX and N64, GC similar to PPC Mac and Xbox to IBM PC. Fifth gen was more like 8th, with two similar devices and one that's different. 

You can make anything look different if you just cherrypick the differences.

The problem with N64 was that it was supposed to have virtually only AAA titles, this was the whole point in the dreamteam. The problem was with the publishers that didn't like the cost of the cartridges - and neither did the customers. Mini-DVD Gamecube used was just as cheap as the competitors discs, just like the Wii's DVD, which is why you saw third parties being friendly with GC and Wii.

No, no. You fail to see the big picture here. PS4 and X1 are pretty much interchangeable, PS4 sells while X1 doesn't. Why? If you wan't something more special, there's Wii U, PS4 sells, Wii U doesn't. Why? You can't just go on to say PS4 is selling better than Wii U because PS4 has nothing special in it, at the same time saying X1 isn't selling because it has nothing special.

While I agree you on that Sony managed to deliver what it's market wanted, there was a huge drop from the 7th gen. Even if none managed to reach the whole market, there was a huge overlap between console owners, with many having two or three of them. 

If you start negotiations on a contract for hardware and then decide to pull out and join another partner without telling the previous one and then proceed to drop this bomb on stage; that's screwing someone over. No two ways about it. And yes, Sony wanted to make money off of this, they were a huge deal in formats, movies and music and their distribution channels alone were easily worth the cost, it wasn't really such an unreasonable demand for what they would have brought to the table. Your second sentence is also a bit funny when you think about Nintendo's own policies towards 3rd parties in the 80's and early 90's. They were now faced with having use of someone with influence and platforms into markets they wanted to access and they needed to forsake some profits and control to get there, but felt that this was really unfair, despite their own Hitler-esque tactics employed against both developers and retailers for about a decade. It's a special kind of irony, this.

PS1 being a footnote in history if N64 had disc and Saturn was simply better designed is simply speculation, it's highly unlikely that it would have been irrelevant. It brought 3D fighters to the fore with titles like Tohshinden and Tekken, it had the arcade crowd appeal with titles like Ridge Racer and Wipeout, it even had computer fans excited with titles like Road Rash, Warhammer, later Diablo and similar fare and it had more childproof games like Jumping Jack Flash. Great platformers, action titles, racing greats like Need for Speed and some really good RPG's and ARPG's to top it off. This wide appeal wouldn't have gone away even with stronger competition and with decent pricing and hardware as well as CD audio and FMV capabilities, it's really hard to make arguments making it a "footnote in history", perhaps even impossible.

The PS4 also carried the flag of three successful consoles before it, the worst of which sold about 90 million, so to attribute its success solely to the failings of MS and Nintendo is grossly inaccurate by all logic. It doesn't innovate or surprise or go anywhere unexpected at all, and this is exactly why it's selling like it is. Placid and safe, a decent business proposal but not hugely exciting for old, grizzled gamers like myself, but that's a different matter. Even if I'm not over the moon about a product, that doesn't mean I can't respect what it accomplishes or that I should disregard its merits as they stand.

360 did have a bad start (so did PS3, though).

So, what is the size of the market then, if you think 7th gen sales were a one off and you obviously project the sales somewhere? Where did the people go and do what if they no longer buy games?

If Nintendo hadn't reneged on the deal with Sony then Sony wouldn't have entered the market and it wouldn't have mattered what format the N64 used. 3rd parties would have had no choice but to adapt to using cartridges for same games, like Resident Evil 2 for the N64.

If Nintendo had gone with CDs or even something similar then Square would have stayed with them and all those sales Sony got from FF7 would have gone to the N64. Games like Resident Evil would have at least been ported to the N64 and may have been Nintendo exclusive. Would the N64 have sold 100 million like the Playstation? Maybe not. But it would have easily outsold the SNES and won the 5th generation by a wide margin.

Either mistake could have been minor on its own. But both together were disastrous.

Actually Nintendo's 80's policies were a result of Atari crash and their own experiences in Japan, where Nintendo had no control over it's own market (similar to Atari in the US). 

I think the logic with Playstation getting quickly forgotten was that if Nintendo and Sega had been more friendly for third parties, the gmes had been on Saturn and N64. The game centric microcomputers disappeared in the 90's, and the developers had to go somewhere. Playstation was the easiest to begin with, so that's where they went. Nintendo's problem with the N64 was to focus on the big players of the industry, pretty much the same problem Sony's been having for the last decade. If we put today's things into 90's context, we have Switch that tries to capture the 3rd parties that didn't have a market anymore due to the shift in the market: 90's microcomputers and devs making games for them, today's bankrupted studios that employees are making new ones based on them.