If you sell games for roughly the same amount as before (or even a bit cheaper), you have extra surplus you can use to subsidise the cost of the console a bit.

Effectively, you'd be cutting a corner on worse load times, I guess?

Keep in mind that the above ignores questions of piracy. I don't know what the actual impact of a CD based solution would have been, but I can tell for sure that the officials at Nintendo thought it would have made a difference when they made their decision.