So we should all blindly go out and buy a product we arent necessarily enticed by at this point? Of course we talk about it because in the end its one of the 3. Surely you have talked about a systems sales before without owning it? 

Several reasons:

1.) It looked like a kids toy (something they rectified with the Wii which looked like an Apple product). This negated things like the Resident Evil exclusivity because it got labelled as the "kiddie console" by a large portion of the public. 

2.) While $99 was cheap, the PS2 and XBox were pretty cheap too ($150 by then) and played DVDs on top of that. I think people saw that as a better value proposition and the PS2 in general was seen as having the more desirable library.

3.) The Nintendo IPs weren't the ones people wanted. Mario Sunshine was no Mario 64. Zelda: Wind Waker had the cell shading controversey and wasn't Ocarina of Time 2 like a lot of people were expecting. Mario Kart: DD even played around with the formula a bit too much. DK was turned into a rhythm style game. Metroid Prime was no GoldenEye type multiplayer hit. 

4.) They gave Sony way too long of a head start. 18 months in Japan and more than one year in US/Europe, Sony basically sealed up the generation before Nintendo really could get going. 

5.) They lost the FPS/college dorm crowd that GoldenEye/Perfect Dark had attracted to MS and Halo and had nothing but Geist to replace it with (big mistake). 

Didn't the Dreamcast reach 10 million units 2 years after it was released? The Wii U has barely hit 7 million units sold and has been out 2 years.. Sega's financial losses on the Saturn, Sega CD and 32X hurt the most. I miss Sega consoles...