After the Saturn's failure in the market, Sega started working on a new console, which had about four different code-names, such as Dorland Katana, Just to name a few. This console would later be known as the Dreamcast. Sega developed the Dreamcast mainly to overcome Sony's Playstation, and Nintendo's N64.

The Dreamcast is launched on November 27 1998 in Japan but, NEC, the company making their graphic chips had not manufactured enough for every console. So there weren’t enough units for everyone, so most of gamers looking to buy one, left the stores without any bags in their hands because of the manufacturing glitches...

Bernie Stolar, who was the president of Sega Of America at the time, wanted to make sure the Dreamcast had a better launch in America. He disagreed with Sega Of Japan's plans to sell the Dreamcast over the internet only, and they disagreed with Stolar's plans. Sega Of Japan's plans were to delay the Dreamcast's U.S. launch to the year 2000.Fortunately, Stolar knew that releasing the Dreamcast under his own plans gave the company an advantage over the holiday season, and Sony's Playstation 2, which was launched in the year 2000.Stolar did not delay the launch, as a result, he was fired just one day before the launch. Even that did not stop the dream from coming. The Dreamcast was released on September 9,1999 in America, with the tagline "It's Thinking" (the tagline in Europe was "Up to 6 Billion Players") exactly ten years after the Sega Genesis launch (September 8,1989).The Dreamcast was the first console to include a built in modem.

But the launch does not go without any problems. People complained that some of the games did not work. Some if these games were Sonic Adventure, Ready 2 Rumble, and even the Web Browser disc. Sega said that it was the discs that contained the problem, and not the Console. They also said it was no big deal, as only less than one percent of them faced this malfunction. They also stated that owners of these discs can return them in exchange for new ones, and shipped new Web Browser discs that same week.

But that small glitch did not affect the launch. Sega held a record of 200,000 pre-ordered units. Beating Sony's record of 100,000. All of the 705 Toys "R" Us stores nation wide reported being sold out of hardware the day of launch. And this time, manufacturing glitches were not the cause. Sega did not expect the Dreamcast to have such a successful launch. They compared the record to the Star Wars Episode 1 opening day which made 28.5 million on the first day. Where as Sega made 98.4 million dollars on both hardware and software at launch. The Dreamcast also launched with an offer for a free keyboard with AT&T's internet service. Although it's not known if they had the same offer in the Japanese launch, a version of WebTv for the Dreamcast was released in Japan.

The Wars Begin.

Right before the Dreamcast’s launch in April 1999 Sony announced its PS2. This brought a lot of attention to Sony and less to Sega. Throughout its life span the Dreamcast was always overshadowed by the PS2 one way or the other. The PS2’s DVD playing capabilities drew people’s attention more than the Dreamcast’s online capabilities.

After the PS2’s launch DVDs became the standard format of video in Japan. DVD stores started appearing everywhere displaying the PS2 not playing games, but DVDs. They weren’t shown playing Madden 2006, they were shown playing the Matrix movie.

After the launch of the PS2 Sega had officially lost Japan. But not North America…at least not yet. However the fact that Electronic Arts announced they would support the PS2 and the Dreamcast not having backward capabilities lead to poorer sales…

(more coming soon)