The only reason the Dreamcast failed commercially is because those in charge couldn't tell their ass from ground. The Dreamcast was an utterly amazing console that had tons of amazing games and to this day is still fantastic. I just got one a few days ago for $40, a steal. It just couldn't get the financial backing because SEGA was too busy putting money into so many other projects they couldn't concentrate on what mattered... the Saturn and the Dreamcast.foxhound_fox
Pretty much.
The Dreamcast failed because SEGA got stuck between a rock and a hardplace. Basically they lost tons of money through failures like...well it's pretty much easier to say the systems they made that weren't: The MEGA-Drive. Anyway SEGA didn't really care because similar to Microsoft or Sony their main market wasn't the home console market but the arcade. However eventually the arcade market started to really crumble. Traditional arcade gaming in Japan wasn't dead but wasn't as big as it once was and in the West well we all know what was happening in that time. Basically now that their main market was crumbling they had absolutely nothing to fall back on because their secondary market was very crippled.
See other arcade companies like say Namco or Konami could easily do the switch from Arcade to Console, but Sega? They couldn't because they made their own consoles. So their choices were either go third party or take a huge risk making another console. Even though that the company was already going through some financial struggles they decided to go ahead with the Dreamcast. Amazingly the console actually succeded but at the end Sega just proved that once again they don't know how to do a lot when it comes to consoles.
First off they did a near repeat of what they did with the Saturn outside of Japan. They didn't tell alot of developers about the Dreamcast until it was a bit too late. Thus a lot of publishers in Japan didn't support it, hell even some within Sega's second party left. Camelot accepted Nintendo's offer in part due to Shining Force III supposedly being "doomed for retail" in Japan.
Speaking honestly Sega just couldn't handle or understand the changing video game market. They still acted like it was the early 90's or late 80's when everything was very cheap and that their "mistakes" would be taken as nothing more. I admit to really liking the "Sega way of gaming" much more then any other companies except possibly Nintendo's but overall vision doesn't equal the ablity to execute. I could only imagine if Sega would have tried to launch a console in this era.
Second off they didn't really work with what they had or very well. In reality the Dreamcast was only "awesome" because it launched in North America a year after it did in Japan thus all of those first year Japanese games getting released immediately as well as the second wave of games being released close to their international dates. Another was just the competition. Even to this day Sega, for some reason, doesn't understand that you have to advertise something and market it well to sell. The Playstation 2 was only such a big deal because Sega let it became such a big deal. The Playstation 2 did the exact same thing the Playstation 3 did. The only difference was that Nintendo and Microsoft didn't have their heads up their butts like Sega did. The Dreamcast had way better games and destroyed the PS2? Okay then show the consumer then. Resident Evil Code Veronica, Soul Calibur, Power Stone, Jet Grind Radio, Marvel vs. Capcom 2, Street Fighter III...yeah STREET FIGHTER III the console had, why this wasn't advertised I have no idea, yes I know the failing in the arcade but that was with the core gamers not the casuals, but yeah anyway Street Fighter III, Phantasy Star Online, Shenmue, Skies of Arcadia, Power Stone II, and yeah yeah I'm sure you know about them all already. But seriously the first and most obvious reason is that all these games came out way too early. Shouldn't have most of them been saved to battle the PS2? Similar to what Microsoft did with their 1st and 3rd parties with the 360? And again these games received very little advertising besides Jet Set Radio and Shenmue, two pretty unappealing games.
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