Development

 

In 1997, the Sega Saturn was struggling in North America, and Sega of America president Bernie Stolar was pressing Sega's Japanese headquarters to develop a new platform. Two competing teams were tasked with developing the console–askunkworks group headed by IBM researcher Tatsuo Yamamoto and another team led by Sega hardware engineer Hideki Sato.

 

Sato and his group chose the Hitachi SH4 processor architecture and the VideoLogic PowerVR2 graphics processor for their prototype. Yamamoto and his Skunkworks group also opted for the SH-4, but with 3dfx video hardware. Initially, Sega decided to use Yamamoto's design and suggested to 3Dfx that they would be using their hardware in the upcoming console, but Sega later opted to use the PowerVR hardware of Sato's design. This was attributed to 3Dfx leaking details and technical specifications of the then-secret Dreamcast project when declaring their Initial Public Offering in June 1997, a move which readers on Gamespy.com named "one of the dumbest mistakes in video game history". Sega's shift in design prompted a lawsuit by 3dfx that was eventually settled.

 

With Sega's machine, no operating system resides in the device until it is loaded in on a disc with each game. The advantage, Sega executives say, is that developers can always ship products that use the version of an operating system with the newest features and performance enhancements. The operating system used by some Dreamcast titles was developed by Microsoft after two years of work with Sega. It was an optimized version of Windows CE supporting DirectX. According to Richard Doherty, president of Envisioneering Group, "Microsoft had initially wanted Windows CE to be Dreamcast's main operating system. It isn't."  The Dreamcast's boot-up sequence was also composed by accomplished Japanese musician Ryuichi Sakamoto.

 

Launch

 

The Dreamcast was released in November 1998 in Japan; on September 9, 1999 in North America and on October 14, 1999 in Europe and November 30, 1999 in Australia. Despite problems with the Japanese launch, the system's launch in the United States was successful. A record 300,000 units had been pre-ordered in the U.S. alone[9] and Sega sold 500,000 consoles in just two weeks (including a record 225,132 sold during the first 24 hours). In fact, due to brisk sales and hardware shortages, Sega was unable to fulfill all of the advance orders. Sega confirmed that it made $98.4 million on combined hardware and software sales with Dreamcast following the September 9, 1999 launch. Four days after its launch in the U.S., Sega stated that 372,000 units were sold bringing in $132 million in sales.

 

Launch titles such as Soul Calibur, Sonic Adventure, Power Stone, Hydro Thunder, Marvel vs. Capcom, The House of the Dead 2, and NFL 2K helped Dreamcast succeed in the first year. Sega Sports titles helped fill the void left by a lack ofElectronic Arts sports games on the system.Dreamcast sales grew 156.5% from July 23, 2000 to September 30, 2000 putting Sega ahead of the Nintendo 64 in that period. However, the launch of Sony's PlayStation 2 that year marked the beginning of the end for the Dreamcast.

 

Financial troubles

 

Despite strong North American and European sales, the poor Japanese launch ultimately left Sega with its enormous US$412 million net loss in the quarter ending March 2000 - double the loss Sega first expected. Sega made a ¥17.98 billion (US$163.11 million) loss for the 6 months ending September 30, 2000, and a yearly loss of ¥42.88 billion (US$388.9 million), making it Sega's third consecutive annual loss. These losses greatly contributed to its discontinuation, and Sega continued to bleed money annually until posting a profit in October 2003.

 

End of production

 

On January 31, 2001, Sega announced that they were discontinuing Dreamcast production by March 30 of that year. The last North American release was NHL 2K2, which was released in February 2002. According to Bernie Stolar, former President and CEO of Sega of America, the Dreamcast was discontinued because the new chair of Sega wanted the company to focus on software.

 

Sega Europe continued to support the Dreamcast until mid-2002, with BigBen Interactive publishing the last batch of PAL titles such as Rez, Evil Twin: Cyprien's Chronicles, Cannon Spike, Heavy Metal: Geomatrix, Razor Freestyle Scooter and Conflict Zone  During the following years, unreleased games like Propeller Arena, Hellgate,[citation needed] and Half-Life were leaked to the Internet in essentially completed, playable forms.

 

In June 2003, Goat Store Publishing released Feet of Fury the first independently released commercial Dreamcast game, sold exclusively via Goat Store, RedSpotGames, and Lik-Sang in America, Europe and Asia respectively.

 

Although production of the Dreamcast ended in 2001, Sega of Japan continued selling refurbished systems and releasing new games until 2007. Many of the games were initially developed for Sega's NAOMI arcade hardware, including Sega's final first-party Dreamcast game, Sonic Team'sPuyo Puyo Fever, released on February 24, 2004.

 

The last Dreamcast units were sold through the Sega Direct division of Japan in early 2006. These refurbished units were bundled with Radilgy and a phone card. The last Dreamcast games published by Sega of Japan were the 2007 releases Trigger Heart Exelica and Karous., nine years after the release of the console.

 

Three other NAOMI games—Exzeal, Illmatic Envelope: Illvelo and Mamonoro—were supposed to be ported to the Dreamcast, however Sega abruptly decided to discontinue the production of GD-ROMs.

 

The Dreamcast continues to be supported by small independent developers. Thousands of freeware and open source applications have been released since the end of production. Even after 2007, new commercial games were released (now on CD-ROM instead of GD-ROM and without official Sega license), most notably Rush Rush Rally Racing and Last Hope.

 

To date, the console is still supported through various MIL-CD independent releases.

 

Successor

 

Throughout the years since its discontinuation, there have been rumors suggesting that Sega is working on a Dreamcast 2, which Sega has repeatedly debunked.

 

Microsoft's Xbox has been described as the Dreamcast's 'spiritual successor', and received sequels to Dreamcast games including Shenmue 2, Jet Set Radio Future, Crazy Taxi 3, The House of the Dead 3, Sega GT 2002 and Project Gotham Racing (the spiritual sequel to Metropolis Street Racer). In addition, popular Xbox titles Fable[40] and Ninja Gaiden started development on the Dreamcast. Similarities between the Xbox 360 and Dreamcast have also been noted.

 

At one point, the two companies could have been so bonded when then-Sega President Isao Okawa wanted Microsoft's Xbox to be backwards compatible with Dreamcast software, and held talks with Microsoft chairman Bill Gates shortly before Okawa's death on March 16, 2001; negotiations eventually fell apart. Microsoft also worked together with Sega to develop the custom Dreamcast port of the DirectX-based Windows CE as an alternative to Sega's proprietary operating system and development libraries, which were used by the majority of releases for the console.

 

Legacy

 

The Dreamcast introduced numerous features that would be standard to future consoles. All models were shipped with modems allowing users to browse the net and play games online via dedicated server through SegaNet (Dreamarena in Europe), a precursor to services such as PS2 Network and Xbox Live.

 

Alien Front Online was the first online console game to feature live in-game voice chat. NFL 2K1 was the first football game to feature online play. Phantasy Star Online, the first console MMORPG, has been cited as one of the most groundbreaking and influential games of the generation. Jet Set Radio popularized cel-shaded graphics. Shenmue is regarded as a major step forward for 3D open-world gameplay, introduced the quick time event mechanic in its modern form, and has been widely cited as one of the best and most influential games ever made.

 

GN named the Dreamcast the 8th greatest video game console of all time,and Edge named it the 10th best console of the last 20 years  while PC Magazine named it the greatest ever.[60] In retrospect, gaming historian Steven L. Kent stated that "SEGA supported Dreamcast better than any single company has ever supported any console". 1UP.com's Jeremy Parish opined that "When the Dreamcast died, so too did the concept of videogames as the exclusive province of the hardcore."

 

Independent commercial games such as Feet of Fury, Last Hope and DUX have also been released. On June 10, 2010, at E3 Sega announced that Dreamcast titles would soon be available on Xbox Live Arcade and PlayStation Network. The first two titles to be released are Sonic Adventure and Crazy Taxi, followed by Sega Bass Fishing and Space Channel 5 Part 2.