The DC had a good year or more lead time in all of the major regions, it was reasonably priced ($199,) and had arguably the best launch library of any console then or since (Soul Calibur, Sonic Adventure, Power Stone etc..) Everything was going the right way for Sega and new and exciting titles were released monthly, but by early 2001 the Dreamcast was officially discontinued.
What went wrong?
The answer isn't surprising, many of you know it already. The Sony hype machine kicked in.
In April of 1999, month's before the September 9th release of the Dreamcast, Sony began to promote the upcoming PlayStation 2. In the lead-up to its launch the PS2 was presented as a digital entertainment savior who's "emotion engine" was capable of rendering Toy Story in real-time, and referred to as a computer rather than as a console. Much was made of the storage capacity of the PS2's DVD media versus the DC's proprietary GD-ROM.
Despite all of Sony's hype the Dreamcast was superior to the PlayStation 2 (at least when comparing first and second generation games.) The DC cost about half as much, had more quality titles in its initial library, and came ready for on-line gaming. Sega fell to the Sony hype machine.
In reality Sony was little more than the straw that broke the Sega camel's back. The Dreamcast was the first relatively successful piece of hardware in a long line of flops that started with the Sega CD. In addition to financial losses from poor console and add-on sales Sega also lost a good deal of consumer confidence and brand loyalty, which ultimately lead to fewer sales of the Dreamcast.
So, what does this tell us about the fervor? Not as much as we'd like to think. While Sony again finds itself coming second to the market, they are facing a much stronger foe. While the original Xbox Microsoft established themselves as a major player in the business who is willing to do just about whatever it takes to be successful. For once Sony has to take on a company that is as big or bigger than they are.
What can Sony do to win or at least do well in the upcoming console war? Crank the hype machine up to 11. Not the "Riiiiiddddge Raaacer!" or "Giant Enemy Crab" type hype we saw at E3, but real hype. Tout the capabilities of the system, show off some real gameplay footage, nail down some actual exciting exclusives, drop the freaking motion-sensitive controller like a brick.
Sony's problem is that they started the hype too early. We heard about the supposed power of the Cell Processor so many years ago and it has changed so much that we just don't care anymore. The specs and capabilities of the PS3 have varied so much (it was supposed to be a hub, and output to two TV's simultaneously) that each new announcement seemed to elicit disappointment rather than excitement. The price point doesn't help much either.
All in all Sony has to convince us that the PlayStation 3 is a product that we simply must have, at least until we get it into our hot little hands.