Given the contemporary examples, they weren't wrong to think so. Everyone was trying to make a console in the 16/32-bit era.
PC Engine/Turbografx
Phillips CD-i (only sorta a console)
Atari Jaguar
Neo Geo
Amiga CD
Some of these are better than others--I'm fond of the PC Engine--but none can be called successful. Neo Geo is somewhat of an exception because it was used as arcade hardware. Some others here are the butt of jokes. There's also a bunch of Japanese consoles around this time that go nowhere, and are little more than fodder for retro gaming YouTube channels.
Sega Saturn and Dreamcast also probably factored in. They weren't nearly as successful as the Genesis. With even established brands floundering it's no wonder people didn't think the Playstation would work.
Not really. Just Sega CD. The PlayStation and the Saturn both came out in 1994 so they were directly competing with each other. The Dreamcast didn't come out until 1998, after the PlayStation was already successful.