21 years ago, the Dreamcast failed – but it could (and should) have succeeded

On a sweltering Christmas Day in Australia back in 2000, I unwrapped my new Sega Dreamcast. I was 13 years old, and the moment was magical. So were the days that followed, as I spent hours on end playing Soul Calibur, Toy Commander, and the Dream On demo disc (remember demo discs?). It felt like I was experiencing the future, not just because the Dreamcast was such an advanced console for the time (especially compared to my last system, the 16-bit Sega Mega Drive) but because everything about it felt so modern. The console design, the logo and branding of the packaging, the promise of online gaming – it was all so slick and innovative.

But what I didn’t know – what no kid my age had any way of knowing – was that my beloved Dreamcast didn’t represent the future of gaming. On the contrary, the Dreamcast was about to become a relic of gaming’s past. On 31 January 2001, Sega announced it was discontinuing the Dreamcast. All told, the console had a lifespan of three years and represented Sega’s final foray into the hardware business. For gamers like me who had only recently installed a Dreamcast in their living rooms, the news was unthinkable: how could one of the coolest consoles on the block have tanked, and so quickly at that?

In the 21 years since then, however, the various factors behind the Dreamcast’s demise have emerged. Collectively, they paint a picture of a console almost guaranteed to fail. Even so, the Dreamcast is widely regarded by critics and gamers alike as one of the most trailblazing consoles in video game history – a system that deserved to not only survive, but thrive, alongside its sixth generation rivals the PS2, Gamecube, and XBox.

So, let’s take a look back at what made the Dreamcast so great, why it ultimately failed, and how it could (and should) have succeeded instead.

What made the Dreamcast great?

Graphically, the Dreamcast punched above its weight. Although it was technically the weakest of the sixth-generation consoles in terms of overall hardware specs, it excelled in certain areas compared to its competitors.

So, while the PS2 was better at things like polygon geometry, physics, particles, and lighting, it lagged the Dreamcast when it came to textures, anti-aliasing, and image quality. Similarly, although the Xbox and GameCube were considerably more powerful than the Dreamcast in most respects, Sega’s console had faster Z-buffer bandwidth (it could render on-screen depth more efficiently) and its tiled rendering allowed for a higher opaque fillrate (it could draw a higher number of large opaque polygons).

What’s more, it was easy for developers to get the most out of the Dreamcast’s hardware, especially compared to the PS2. Sony’s sophomore system was an absolute bitch to develop for, and this meant that several early third-party ports like Dead or Alive 2 looked better on the Dreamcast than the PS2. It took a while for developers to figure out how to fully tap into the PS2’s graphical capabilities, and even then, the supposed disparity between its graphics and those on the Dreamcast was driven as much by the Sony hype machine as anything else. In short: the Dreamcast did – and, just as importantly, could have continued to – compete graphically in the sixth-generation era.

The Dreamcast’s games library was another area where it set itself apart from its competition. The console boasted a diverse range of titles across a variety of genres, including arcade ports like Crazy Taxi, fighting games like Soul Calibur, platformers like Sonic Adventure, RPGs like Skies of Arcadia, sandbox games like Jet Set Radio, sports games like NFL 2K, and delightful oddities like Space Channel 5 and Typing of the Dead. Admittedly, the Dreamcast lacked a true killer app (more on that later), however, it did offer a more polished line-up of titles at launch than either the PS2 or the Xbox, and didn’t fall too far short of the frankly jaw-dropping GameCube launch library, either.

But without a doubt, the biggest thing the Dreamcast got right was online gaming. The console was certainly more ambitious in this regard than either the PS2 or GameCube; unlike them, the Dreamcast came with a built-in modem, and players took part in online play via a dedicated subscription-based service – something neither Sony nor Nintendo invested in. True, Sony would eventually improve the PS2’s online gaming experience, and when the Xbox finally arrived it quickly set the standard for internet-enabled consoles. But before any other console in history, the Dreamcast offered seamless online gameplay – the sublime Quake III: Arena port even allowed cross-play with PC gamers! – complete with voice chat and (very basic) DLC.

If you then toss in other innovations like its pioneering use of second-screen technology, the Dreamcast starts to look like a sure-fire winner. Surely, the Dreamcast’s solid graphical horsepower, strong library of games, ground-breaking online play, and other little extras mean it was a console that deserved to succeed?

Why did the Dreamcast fail?

So, why didn’t it? Honestly, it’s hard to blame the Dreamcast’s downfall on any one thing.

Timing was certainly a major factor. For starters, the Dreamcast arrived hot on the heels of the poorly received Sega Saturn (which came in a distant third to the PlayStation and Nintendo 64), not to mention the Genesis/Mega Drive 32X and the Sega CD/Mega-CD – overpriced, undercooked add-ons for the aging Genesis/Mega Drive which disenfranchised the Sega faithful. Gamers and retailers alike have long memories, and there simply wasn’t enough time for them to forget (much less forgive) Sega’s earlier missteps before the Dreamcast launched. The Saturn and Sega CD/32X fiascos made everyone cautious; nobody wanted to rush to buy a console from a company that had burned them only a few years before.

There were other drawbacks to the Dreamcast being first out of the blocks, too. The console’s 1998 release meant it was almost a year and a half older than its nearest competitor, the PS2 – putting it at a technological disadvantage to every other sixth generation console. Yes, the Dreamcast’s hardware had its strengths and was – you’ll forgive the expression – a dream to program for, but it’s tougher to sell a platform that’s the weakest around (on paper, at least). And even the Dreamcast’s one clear tech advantage, its built-in modem, wasn’t immune to the console’s poor timing. Online multiplayer and DLC are ubiquitous now, but they weren’t yet a major draw for console gamers at the turn of the millennium.

Then there’s PS2 hype to consider. The original PlayStation was the runaway winner of the fifth generation of video game consoles, so anticipation for the PS2 was understandably high. Sony made some big promises regarding the PS2’s hardware – some of which, like the capabilities of the console’s Emotion Engine, it never really delivered on. But it didn’t matter; thanks to Sony’s phenomenal track record with the original PlayStation, its claims about the PS2’s game-changing tech that flooded the gaming press, and general excitement around the console’s then-novel DVD drive, the Dreamcast struggled to get noticed. Sega may have got a head start in sales by launching the Dreamcast first, but Sony spent that time cultivating a feverish level of hype that ultimately converted to an unassailable share of the market when the PS2 finally launched.

We can’t chalk up all the Dreamcast’s woes to bad timing and hype, though. The dysfunctional relationship between Sega of Japan and Sega of America, and the console’s ill-conceived marketing campaign played a part, too. Sega of Japan CEO Isao Okawa was convinced the company should leave the hardware market to focus on software development for third-party consoles, ensuring his support for the Dreamcast was lukewarm, at best.

By contrast, senior Sega of America executives like Bernie Stolar championed the console at every turn, but they were forced to contend with a comparatively small marketing budget. The best they could do was mount a $100 million-dollar campaign (allegedly only spending half of that amount, in the end) and even this was a colossal misfire. While Sony pitched the PS2 at a mainstream audience, Sega primarily targeted hardcore gamers – effectively ignoring the rapidly growing casual gamer demographic.

Aside from its limited mainstream appeal, the Dreamcast also had another, bigger problem: it didn’t have a system-exclusive killer app. Sure, Soul Calibur and Sonic Adventure both came close to fitting the bill, however, neither were must-buy titles to quite the extent Sega had hoped. Then there’s action-adventure effort Shenmue, a wildly ambitious creative and technical accomplishment with a production price tag of at least $50 million. Shenmue enjoyed considerable fanfare on release but failed to connect with a wide enough audience to justify its eye-watering production costs.

So, whereas the PS2 had Gran Turismo 3, the GameCube had Super Smash Bros. Melee, and – most notably – the Xbox had Halo: Combat Evolved, the Dreamcast never dropped a title so irresistible it drove console sales to any appreciable extent.

A killer app wasn’t all the Dreamcast lacked, either – it was also missing titles by video game industry heavyweights EA and Squaresoft, as well. EA’s refusal to support the console was arguably the biggest issue here, and allegedly stemmed from a dispute with Sega over console exclusivity. The company demanded sole publishing rights to all third-party sports games on the Dreamcast, a demand that Sega baulked at. The result was that no games under the popular “EA Sports” label ever came out on Dreamcast, which cost the console a sizeable chunk of the sports gamer demographic. It didn’t matter that the Dreamcast had top-shelf substitutes like NFL 2K and Virtua Tennis – people wanted the EA Sports brand they already knew and trusted.

And so, together, all these factors – timing, hype, politics, marketing, and game library shortcomings – proved more than enough to sink the ostensibly unsinkable Dreamcast.

How could the Dreamcast have succeeded?

Things didn’t have to shake down this way, though. On the contrary, by listing out the various issues that killed Dreamcast, we’ve also set out a roadmap for how Sega could have saved the console (hindsight will do that).

First, Sega shouldn’t have rushed the Dreamcast out the door so early. It’s easy to see why the company’s pro-hardware executives were eager to launch a new console quickly; they were trying to make up for a string of high-profile failures and were tempted by the prospect of cornering the next-gen market long before their competitors. But delaying the Dreamcast’s launch by a year would’ve allowed Sega to distance itself more fully from the Saturn, Sega CD, and 32X.

Moreover, it would’ve given Sega the chance to tweak the Dreamcast’s existing graphics specs and console functionality (a built-in DVD player like the PS2 and Xbox had would’ve been nice), shrinking the technical gap between the Dreamcast and its rivals. Even relatively minor increases in the Dreamcast’s performance and versatility would’ve helped the system come closer to parity with other consoles, and at least partly future-proofed it against significantly more powerful market entrants like the GameCube (which itself lacked DVD technology).

The later launch and better hardware would also have given Sega more time to tackle PS2 hype, too. Embracing the same edgy approach Sega brought to the “Console Wars” of the mid-90s, Sega should have held interviews and run ads that openly called out Sony on some of its more outrageous statements – like how the PS2 could crank out 75 million polygons per second… outside of an actual game environment – and emphasised the relative parity of the Dreamcast’s graphics and the marked superiority of its online gameplay. No, online gaming wasn’t a major draw back then, but the concept of it still excited people on some level. It wouldn’t sell the Dreamcast on its own, but if Sega presented gamers with a DVD-equipped version of the console demonstrably capable of producing next gen graphics on par with the PS2, then best-in-class online functionality might have been enough to sway them.

This all feeds into the Dreamcast marketing campaign itself. There’s no getting around some of the internal politics and marketing spend issues that hobbled the campaign, however, there’s also no denying that even the console’s biggest internal advocates dropped the ball here. Let’s be blunt: Sega shouldn’t have focused its attention so heavily on hardcore gamers. Yes, the Dreamcast undeniably appealed to the kind of gamer to whom near-perfect arcade ports of titles like Dead or Alive 2, Virtua Fighter 3 and Ikaruga matter. But its library of games was also unmatched when it came to variety and creativity, which meant that, theoretically, the console had something for everyone, even people who didn’t consider themselves gamers. Marketing the Dreamcast to this nascent segment of the market – who also lacked the intense brand loyalty of the average hardcore gamer – could have been insanely lucrative.

This doesn’t mean Sega should have ignored hardcore gamers entirely. But to court them, the Dreamcast needed a killer app. Admittedly, that’s easier said than done – it’s basically saying “Sega should have just gone and made a game so good everyone needed to buy it” as if that’s not what everyone involved was already trying to do. And to be honest, this is probably the biggest hole in our roadmap; the best I can offer is that if Sega had fixated slightly less on arcade ports, that might have freed the company up to pursue more console-native projects and resulted in a true killer app for the Dreamcast.

Or maybe Sega didn’t need to create a killer app itself. Maybe this could’ve come from a third-party – a company like, I don’t know, EA? Let’s be real here: even if NFL 2K was a superior game to Madden NFL 2000 (and many critics would argue that it was), it didn’t have the brand power of the John Madden/EA Sports combo Sega needed to lock in the sports gamer demographic. So, while a Dreamcast port of Madden NFL 2000 would likely have amounted to little more than a prettier version of the game that appeared on the PlayStation, with none of the gameplay enhancements introduced by NFL 2K, it could’ve been the killer app Sega desperately needed. Capitulating to EA would have stung – especially after Sega already forked out $10 million for sports game-focused development studio Visual Concepts – but it would’ve paid off in the long run.

So, that’s everything on the roadmap covered – is there anything else Sega needed to do to save the Dreamcast? Absolutely. That second screen technology I mentioned earlier never really caught on, so Sega either needed to push developers harder to incorporate it fully, or phase it out entirely. Otherwise, it just meant the company was producing needlessly expensive memory card units with costly added components (LCD displays, face buttons, speakers) that were effectively redundant. And while we’re talking about memory, an external hard drive peripheral might’ve helped set the Dreamcast apart – especially since the Xbox sported a built-in hard drive that made memory card technology look positively ancient.

Most of all, the Dreamcast needed a new controller; one with a more ergonomic design, plus an additional analog joystick and at least two more face buttons. Without this, the Dreamcast would’ve run into trouble trying to support the control schemes of many third-party games that came out in the early-00s that relied on the dual-analog/six+ button set-up popularised by Sony’s iconic DualShock controller. Swapping out the original controller isn’t a big deal – the Xbox introduced a much-improved replacement controller post-launch, after all – but nevertheless, the Dreamcast’s hypothetical future depended on it.

Of course, Sega could have fixed all this, plus everything on the roadmap, only for the Dreamcast to still fail. That’s the nature of the video game industry – heck, of the entertainment industry at large: doing everything right doesn’t guarantee success. Let’s also not forget that the console market is a fiercely competitive space; when even cashed-up systems like the GameCube are considered flops, the Dreamcast was always going to face an uphill battle.

Yet it’s a battle Sega should have fought better all the same. If it had, there’s a decent chance that 13-year-old Aussie kid unwrapping a Dreamcast in 2000 really could have held the future of gaming in his hands – instead of the fondly remembered footnote Sega’s last ever console turned out it be.

Agree? Disagree? Let me know in the comments below, or on Twitter or Facebook!

2 thoughts on “21 years ago, the Dreamcast failed – but it could (and should) have succeeded

  1. 21 years ago? Dreamcast said it’s goodbyes in the UK in 2002, I remember they were still releasing a few games that year (not a lot but like 6 games). This must be a region thing and then you had a football team wearing a t shirt that was representing Dreamcast (2000-2002)


    1. I think you’re right – from memory Sega made the Dreamcast discontinuation announcement in 2001, but how quickly the actual wind down happened differed by market. Thanks for reading!


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