After facing strong competition from Sony's recently released PlayStation 2, Sega discontinued the Dreamcast in March 2001 and withdrew entirely from the console hardware business. However, support of the system continued in Japan where consoles were still sold until 2006 and new licensed games continued to be released.
Despite its short lifespan, the Dreamcast was widely hailed as ahead of its time, and is still held in high regard for pioneering online console gaming - being the first console to include a built-in modem and Internet support for online gaming. As of 2009, the console is still supported through various homebrew video game releases.
In 1997, the Saturn was struggling in North America, and Sega of America president Bernie Stolar pressed for Sega's Japanese headquarters to develop a new platform. Two competing teams were tasked with developing the console - a Skunkworks group headed by IBM researcher Tatsuo Yamamoto and another team led by Sega hardware engineer Hideki Sato.
Sato and his group chose the Hitachi SH4 processor architecture and the VideoLogic PowerVR2 graphics processor for their prototype. Yamamoto and his Skunkworks group also opted for the SH4, but with 3dfx hardware. Initially Sega opted to use the Skunkworks group's 3dfx-based hardware, even suggesting to 3dfx that they would do so. However, they eventually chose Sato's PowerVR based design. Sega's shift in design prompted a lawsuit by 3dfx that was eventually settled.
The Dreamcast was released in November 1998 in Japan; in September 1999 in North America and on October 14, 1999 in Europe. Despite problems with the Japan launch, the system's launch in the United States was successful. In the United States alone, a record 300,000 units had been pre-ordered and Sega sold 500,000 consoles in just two weeks (including a record 225,132 sold during the first 24 hours). In fact, due to brisk sales and hardware shortages, Sega was unable to fulfill all of the advance orders. Sega confirmed that it made US$98.4 million on combined hardware and software sales with Dreamcast with its September 9, 1999 launch. Four days after its launch in the US, Sega stated 372,000 units were sold bringing in US$132 million in sales.
Launch titles such as Soul Calibur, Sonic Adventure, Power Stone, and Hydro Thunder helped Dreamcast succeed in the first year. Sega Sports titles helped fill the void with no Electronic Arts sports games on the system. Dreamcast sales grew 156.5% from July 23, 2000 to September 30, 2000 putting Sega ahead of the Nintendo 64 in that period. However, Sony's launch of the much-hyped PlayStation 2 that year marked the beginning of the end for the Dreamcast.
On January 31, 2001, Sega announced that it was ending production of Dreamcast hardware by March of that year although the 50 to 60 titles still in production would be published. The last North American release was NHL 2K2, which was released in February 2002. With the company announcing no plans to develop a next-generation successor to Dreamcast, this was Sega's last foray into the home console business.
During the following years, unreleased games like Propeller Arena and Half-Life were leaked on the Internet through warez groups and independent hackers.
Although production of the Dreamcast ended, commercial games were still developed and published by Sega of Japan. Many of these were initially developed for Sega's NAOMI arcade hardware, including Sega's final first-party Dreamcast game, Sonic Team's Puyo Pop Fever, released on February 24, 2004.
The last Dreamcast units were sold through the Sega Direct division of Japan in early 2006. These refurbished units were bundled with Radilgy, and a phone card. The last Dreamcast games published by Sega of Japan were the 2007 releases Trigger Heart Exelica and Karous.
Through a free software development kit called KallistiOS, software support of the console continues with homebrew games, emulators and utilities being released for the system. These include the 2009 unlicensed commercial releases Last Hope: Pink Bullets, Wind and Water: Puzzle Battles and DUX. Several Dreamcast emulation projects have also emerged including Chankast and nullDC." (Wikipedia)
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