The usual gamer explanation is that the PS2 killed DreamCast, but that's only partially correct. The main cause of the demise of the DreamCast was a combination of Sega's business plan not being able to meet their capabilities, and Sony's business plan being able to meet theirs.
Sega produced their consoles under a model which did not allow for underperformer status; they had to get a decent market share to make a profit. This only works if you attain that market share, or if you have enough money in the bank to shore up weak years, and Sega didn't have either happen. Their system did not perform to expectations, and they had no contingency for this, so their hardware side folded.
Sony's model was similar, but they could afford to do more advertising than Sega, and could distribute to a much larger overall market. The initial losses to Sony from the PS2 were eventually shored up and the system made a profit in the long run. They gambled on the market share, and put the odds in their favor, ultimately reaping the rewards when the PS2 got the necessary market share.
Sky Render - Sanity is for the weak.
