Actually there was more to CDs than just FMVs, for starters they were cheaper and quicker to produce in comparison to carts, which was attractive to publishers.
This was also around the time that CDs were starting to better take advantage of the format, but even if it was just because of FMVs.....FF VII was still one of the PS1's best selling games.
Had they adopted CDs, they might have still had support from companies such as Square.
Speaking of marketing, one thing to consider, the PS1 was also marketed towards adults and multiple games which were popular at the time but not available on the N64 such as Tomb Raider. IIRC they also had PS1s in places such as the Ministry of Sound nightclub.
I also heard that in Japan on launch, because of Sony's pricing strategy which gave retailers a larger cut, they were actually pushing PS1s because it was more profitable for them.
Overall I think there were multiple factors which contributed to the PS1s relative success compared to the N64.
It's on the Wikipedia article:
https://en.wikipedia.org/wiki/Nintendo_64#Release
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HiradeGirl:
