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Other people have pointed out reasons why Sega would still be in trouble. What interests me is whether Sega would still feel the need to launch the Dreamcast in 1998.
If Sega could delay the Dreamcast by a year, let's say with a late 1999 release in Japan and a 2000 release elsewhere, it'd have less time to build up strength prior to the PS2's launch, but it's also likely be a different piece of hardware. Maybe it'd be closer to the NAOMI in terms of processing power, maybe it'd feature a second analog stick on its controller, etc.
One thing that the early Dreamcast would have going for it in this case is an amazing early library, perhaps even more than IRL, with a healthy backlog of NAOMI games that could easily be ported to this more powerful version of the Dreamcast. On the other hand, there'd be very little time before the PS2. And although Sega would be able to count on support from Namco and Capcom, they'd likely still have less third party support than PlayStation and PS2.
Maybe the Dreamcast would live a bit longer overall, but I doubt Sega would be up for releasing another console come 2005 or so.
Of course, even the implications of delaying Sega's entry to being a 3rd party publisher would be interesting. For example, we obviously wouldn't have all those Sonic ports on the GameCube and PS2 if Dreamcast stuck around, so maybe interest in the Sonic series would be lower afterwards as a result. Maybe keeping the 2K series seperated from EA Sports would prevent the price wars that led to Madden NFL getting exclusive rights. Maybe some Namco and Capcom games would also be on the Dreamcast, such as Devil May Cry, Resident Evil, Tekken, etc
Sorry to ramble, but this tpic brings up so many ideas!
Love and tolerate.
