>>118512832/2
They assembled a "dream team" of second and third party devs such as Rare, Midway and id. They enforced strict quality control measures, and purposely refused to share hardware documentation with any devs other than dream team members to filter out low quality games. They were banking on people seeing stuff like DOOM 64 and Banjo-Kazooie and saying, "Boy, the PS has a lot of games, but nothing as good as this stuff!". This was somewhat true: you can pick a random N64 game out of a bin and it will probably be of a significantly higher quality than bobbing for one of the PS's 2000 apples. The problem was, regardless of the ratio of good-bad, the PS had great games, too, and they had more marketing money driving them, making a pick and choose scenario largely irrelevant. The console was also cheaper to develop for. It was cheaper for the consumer to own and buy games for. It had multimedia features. It offered a wider range of genres appealing to multiple age and gender demographics. It offered just about everything that Nintendo didn't to devs and consumers alike, and Nintendo's approach of "well, our console has no loading times, it's built like a tank, and you'll really, really like the 12 games worth playing" just wasn't enough to sway the average persom. Ironically, the N64's biggest selling point -- built in 4-player capability -- probably just hurt them further because the kids om the culdesac just ended up sharing the same console and handful of games at sleepovers, with little incentive to buy their own unit for all of those amazing RPGs it had (/s).
The answer to your question is, "both". They were coping, and they coped by intentionally making the console difficult to work with in hopes of providing games of such a high quality that the competition's offerings wouldn't matter. Unfortunately, this didn't work out so well, and they ended up making the same mistake again with the Gamecube to an even greater fault.