Sega CD and 32x aren't released. Saturn launches in NA winter 95 at $399. It's still $100 more than PlayStation but Target, Wal-Mart, and Sears all carry it. These retailers don't drop Sega like a rock. VF2 launches on the Saturn in the updated version. Sega of America doesn't focus on godawful sports games for the Saturn. Working Designs gets exclusive deal with Sega, instead of being given the cold shoulder by Sega of America. 50+ games that never made it to the west get fast tracked to Saturn. By 1996 Saturn has a reputation for being the console of Fighting game and Shmup fans. Sega manages to take Saturn from the 10 million in our timeline to 25 million in the new timeline.

Dreamcast launches worldwide on 9/9/99. The controller has two control sticks. MIL-CD is gone, so no piracy. GTA3 and a bunch of sports games from PS2 get ported to DC. Lots of PS2 games are made for both PS2 and DC early on. Capcom supports the hell out of Dreamcast porting over everything that they possibly can from PS2 and GC. Dreamcast sells 30 million lifetime. Gamecube sells 17 million lifetime. Xbox sells 15 million lifetime. PS2 only goes to 152 million lifetime.

Dreamcast 2 launches in 2005. It has motion controls and is about as powerful as the OG Xbox. Ninja Gaiden is a launch title and not on Xbox. Sega uses its extensive arcade experience to make a ton of fantastic and genuinely fun arcade style titles like Sambo Di Amiga, Fishing Games, Golf Games, Baseball Games, etc. Unlike the Wii these games are made with love and care. No Mii-Style graphics. No tech-demo-pack-in like Wii Sports. Actually, good games with motion controls. DC2 has a boatload of amazing games for grown-ups. It's seen as a system for teenagers, unlike the Wii's kiddie image. DC2 is the place to be for all those mid-sized devs that died out in our timeline's 7th gen. People didn't buy 3rd party games on Wii. 3rd party games sell like hotcakes on DC2.

Having beat Nintendo to the punch the Wii fails to gain traction and only sells 30 million units lifetime. Dreamcast 2 hits 100 million units lifetime. Xbox 360 loses a bunch of Kinect marketshare to DC2 putting 360 at 64 million lifetime. PS3 loses some as well going to only 80 million lifetime. 360 isn't doing as well because OG Xbox didn't take off nearly as much. DC1 beat MS to the punch on online gameplay.

DC3 Launches in 2011. It's a home console with about the same specs as the Switch. Because it has 4GB of RAM late 7th gen games look and run ridiculously smoother. By the time PS4 and XB1 come around DC3 has already sold 20 million units. XB1 continues to struggle even worse now. Wii U is still a massive flop. PS4 is seen as the system to have this gen with DC2 bringing up the rear. Some games don't launch on DC3 because it isn't as powerful as PS4/XB1. XB1 numbers are abysmal in PAL territory. PS4 ends at 90 million. XB1 ends at 40 million. DC3 is at 70 million. Wii U ends at 8 million.

Vita doesn't even bother coming out because Sony knows it has a tough fight vs DC3 and puts all resources into it. 3DS launches as 2DS XL in 2012 for $175 because Nintendo couldn't take the risk. Their new handheld has to do well or they are toast. 3DS manages to sell 100 million lifetime due to better pricing strategy and a good launch lineup. Wii U software support ends in 2015 instead of 2017. Nintendo home consoles are considered dead.

DC4 launches in 2018. It's as powerful as PS4 Pro. Xbox launches Gamepass in 2017 and releases all their 1st party games on PS4 and DC4. Xbox is pretty much 3rd party at this point, just like today. Xbox Series is sitting around 15 million sold as of right now in the new timeline. DC4 is at 70 million. Switch also launched in 2018 and was successful but Nintendo is different. They are afraid of losing marketshare to Sega. The strategy of running a weaker but cheaper system doesn't work out as well when Sega is around to compete. Nintendo puts their games on sale frequently, works on making the Wii VC a thing on Switch, and doesn't charge for online. Switch sells 80 million but Nintendo KNOWS it could have been twice that.

It is assumed by everyone the Xbox Series will be the final Xbox console. Switch 2 and DC5 are both launching in a few weeks. Nintendo doesn't mess around with Game-Key-Cards. DC5 is $400 and about as powerful as PS5/XB Series X. Sony doesn't release games on PC because everyone agrees that Xbox's strategy the last 2 gens was awful. Sega doesn't bother with PC either unless it's Total War or some other game that requires a mouse.

Certainly not going to save DC now

It’s very hard to say. It doesn’t seem that third-party was looking to support DC, so Sega would’ve needed some killer 1st party titles, which—judging by Sonic Heroes, Shadow the Hedgehog, and Sonic ‘06–doesn’t sound like a very safe bet. DC would’ve sold far less than GCN regardless of if the system ran until 2005/2006, and the subsequent generation would’ve not been any kinder with Nintendo dominating the casual/family-friendly & JP market.
That all to say: Sega would’ve probably been stuck at a distant fourth place. If they stuck around until the late-2010s, however, I could definitely see a Sega system racking up some really strong figures! With all that Sega has been putting out, as well as the third-party support likely being present (assuming Sega stuck with similar hardware infrastructure as PS5/XBSXS), I could see a Sega system today burning through 40-50mil units.

The same, just a some time later down the line.

There were plenty of Wii games made with "love and care"; Mario Galaxy 1 & 2, Zelda Twilight Princess & Skyward Sword, Metroid Prime 3, Donkey Kong Country Returns, Mario Kart Wii, Sin & Punishment Star Successor, Monster Hunter 3, Xenoblade Chronicles, The Last Story, etc.

Interesting; why do you think Sega would suddenly have a better shot in the late 2010s? Are you basing that on their software output, or do you see an opening in the hardware market then?

My focus was mostly on software output, though with Xbox sales falling as they are and Sony struggling to maintain a solid stream of first-party titles (at higher and higher costs for hardware), I guess you could also say that an opening in the hardware market has opened up.

If you want to see what 7th-gen games would look like running on SEGA hardware. Look at the SEGA Lindbergh arcade board. It was more or less a 7th-generation console. Now it would need 2 additional CPU cores and reduce the RAM from 1GB to 512MB to be a console, but Virtua Fighter 5. House of the Dead 4. Afterburner Climax.

This. Sega's owners didn't want to make consoles even during the Genesis era, which was the one time they were truly successful. They deferred to Nakayama until he left right before the Dreamcast launched, and once he was gone, they started turning up the pressure to get out of the hardware market.

Short of them selling Sega to Microsoft so that Microsoft could market the Dreamcast, which Stolar actually wanted them to do, there wasn't any scenario where Sega stayed in the hardware market. Nintendo and Sony were simply too well-entrenched, and once you threw Microsoft into the mix, it was all over.   I just kind of wish that Isao Okawa had lived a few more years after Sega dropped out. Maybe with his ongoing support, now that they were respecting his wishes to get out of hardware, they could have been the third-party powerhouse he envisioned.

I was referencing the motion control style games like Wii sports. I love my Wii and have 25 Wii games to this day.

I mean, I'd argue Wii Sports (and Resort) was actually a quality game that was very much made with care. It may be simple, but that's by design in order to make it as accessible as possible. 

It would have been interesting to see Sega's take on a Wii-like console though; they did release some bangers that gen such as Sonic Colours and Generations, All Stars Racing and its sequel Transformed, Bayonetta, Vanquish, House of the Dead Overkill, Madworld, etc.