I don't know whether they had lower margins, but they used CDs, which were cheaper to produce than the ROM chips which were so far common for consoles (N64, SNES, Mega Drive, NES, ...). The price of those did go down a lot over time (early NES cartridges had 4 KB, early N64 cartridges 8 MB, a 2000 fold increase), but not quite quick enough apparently. High cartridge prices were not limited to Nintendo.