And all because the PS2 could play DVDs and the Dreamcast couldn’t. Fucking DVDs. As ridiculous as that sounds today, people went apeshit over DVD playback capabilities back in the early 2000s.
But to be fair I also think Sega was their own worst enemy. In the 90s alone they released the Sega CD, 32X, the Saturn and the Dreamcast. Not to mention the Genesis 3 and CDX as well. If they would have slowed their roll and stopped cannibalizing their own sales, they might have done alright. The addon idea could have worked out better if done right. Hindsight is 20/20, so if they had a crystal ball they should have done something like this, and they’d still be making consoles today:
Delay the Sega/Mega CD to allow themselves more time to rewrite the graphics ASIC to include 3D rendering capabilities.
Cancel the 32X and Saturn; they were never even announced. The Sega CD is the next gen console.
Sell it as an addon for $199, and cut the price of the base Genesis to $50. Release in 1994, along with bundle deals for $249 with an included game (for people who don’t already own a Genesis), and proceed wipe the floor with Sony before they even get a chance to compete.