They were loosing money on each sale of the Dreamcast, and couldn't afford to get a large enough base. Plus, it was found out hot to easily pirate games. I think the effects of piracy are over rated, but Sega didn't want to take that risk when they were loosing money on the hardware.
The dreamcast also say in the shadows of the PS2. Sometimes the hardest thing to compete against is the hype of vapor ware.








