The point is exactly that, that Nintendo being a tyrant lead they to look for other alternatives, and they found Sony. CD or not CD they would have flocked to the better business partner so it would be likely that the fate of N64 would be still selling less than SNES instead of over 80M as some have estimated.

Hey it's alternate history...so any outcome is possible. The N64 was too powerful a machine, and it had too good of a start for it to crash like it did if Nintendo had gone with the CD format. We would have seen FFVII on the N64, Konami might have done MGS on the N64 as it had better hardware to power up the game. Gran Turismo still would have been a hit for Sony, but it would have been close race.

You are the second to say it. For me we had to follow the change OP suggested that is just making N64CD and keeping the rest more or less untouched and see what would change because of the CD in it.

If anything goes by we could say Sony wouldn't create PS1, instead Nintendo would buy Sony and every TV from Sony would come with a CD reader for N64 games and they would sell billions of units.

Unlicensed NES games wouldn't have been such a prevalent thing if there was no money to be made from it. I'm not saying this was a leading reason for them sticking with carts, it was just one of many factors.

Nintendo's relationship with third parties was strong enough that even with Sega offering a competitive alternative with the Megadrive, SNES still got top-shelf third party support with the biggest third party games of the generation like Final Fantasy, Street Fighter II, and Dragon Quest. There's no reason for that to change if they went with CDs for N64.

Time, attrition and continued strain can change everything.

Sure unlicensed NES games would only happen because there were money to be made (which doesn't mean it was made), as much as HW piracy was quite common for it as well (in Brazil there were plenty more non-Nintendo NES than otherwise).

Plus the idea Sega had with the CD was exactly to combat piracy, because at the time the CD manufacturing structure was much more expensive than for cartrdige (at least that is what I heard).

Once Atari lost its suit to keep Activision from developing games for the 2600, the floodgates opened for all kinds of shovelware, including shit like Custer's Revenge. Nintendo was well aware of the market conditions that led to the 1983 crash. They had to reckon with them in order to get the NES out in the US. A lot of retailers flat-out refused to stock video games at all. Even the way the NES was designed played into this. The box we got with the weird spring-loaded cartridge slot and the huge, boxy cartridges were an attempt to evoke a VCR and video cassettes. R. O. B. was thrown in to tap into a fascination with robots people had at the time. Nintendo had to do all this, and I would imagine some financial incentives, just to convince retailers to stock the NES. From the NES on, almost every platform has had some form of curation for its titles to ensure console makers would see a ROI and make it tougher for companies to tarnish their reputations by releasing shovelware and bad pornographic games. Even Steam used to have a degree of curation.

I dunno about that, CDs are a much simpler medium than cartridges which was the main reason they could be produced so much more cheaply.

At any rate, I think the 4th gen showed third parties were willing to stick with Nintendo even when there was a competitive alternative. Nintendo simply gave them no choice but to leave by only offering an expensive medium that couldn't really support the games they were making.

From what I know at the time to setup a production "floor" for CD was expensive, the CD drive on the console was also expensive, but after that to print CD was cheap and piracy were hardly expected because of the cost to regular people to have CD burner PCs.

Just look that Atari and to a smaller degree NES had non authorized SW release, SNES was also prone to piracy of the cartridges, but I don't know of illegal games on PS1 (but yes it didn't take long for piracy to be rampant).