I still wish Sega was still in the console business. They were a good company. The Sega Genesis is what got me into gaming and I thank them for that :)

I don't think they failed miserably. Dreamcast sold 10.6 million consoles. Saturn sold around 10 million. While those numbers don't seam high you have to remember that Dreamcast was alive in the US for year and a half. PS3 sold 11 million in similar time frame.  

Saturn was a failure as it couldn't penetrate the US and European markets but it had some amazing games and it was very profitable in Japan.

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.

Its not as simple as "PS2 was the cause!!!"

You have too look at Sega's history since Genesis, i.e. it wasn't a sudden event or the Dreamcast itself.

Sega just made many repeated mistakes an burnt its relationship with devs and gamers alike. 1st they made too complicated and costly addons to the Genesis, 32x and SegaCD. Both of these had short lives, very little support, and pissed off gamers who paid a lot of money for them and got little in return.

Then Sega put out the Sega Saturn. This was an ok machine and was holding its own. Yet, a year or so later Sony and then Nintendo came out with their own machines, both much better. Sony new to the market with a now proven true strategy of getting every game known to man put on their system allowed them to catch Saturn's install base rather quickly and do something Sega could not ever do, take Nintendo's exclusive 3rd party support. (Granted a big part of that was Nintendo's fault) Realizing that the Saturn was destined to become in 3rd place, Sega decided to cut its life short and jump into the next gen early hoping to get an early enough head start (2yr) that they would be dominate and sell well. (i.e. Genesis was their best selling machine partly because it came out so many years before SNES).

Then Sega launched the Dreamcast completely dropping all support for the Saturn without any input from 3rd parties who were still in the middle of making games for it and hadn't even heard of the Dreamcast. Saturn owners felt burnt and jumped to the, by then, dominate console Playstation and its massive library. 3rd parties were very upset since Sega had now burnt them for the 2nd time with short lifecycles and no prep time. They almost universally stopped making games for Sega. This is actually the nail in the coffin that sealed Sega's fate. Unlike Nintendo, Sega can't live off of its own software. It just took Sega a couple of years after that to realize that it was going to fail again. When PS2 was announced and then delivered Sega's early lead was quickly gone and Sega finally openly admitted what should have been apparent sooner, their console business was done.

 Technically it didn't kill them, asthose consoles had sucessors, unlike the Dreamcast.

@superchunk

"Unlike Nintendo, Sega can't live off of its own software."

Today this would be true...

However they could with the Genesis. In fact most of the gains Genesis made against Super nintendo was on the strength of Sega software. No one really supported it back in 1991-1992...

Sega's problem was that they always tried to reinvent the wheel and be the first one ont he scene. Turns out the round one worked just fine...

 You fail hard, go look at million seller list on this site and search for Sega's million seller on Sega console, then made the same search for Nintendo

Genesis had support from western developer in particolar from EA thanks to good business decision from SoA that made Genesis a viable platform in USA.