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Rumors about the upcoming Dreamcast-spread mainly by Sega-leaked to the public before the last Saturn games were released. This effectively left the Western market without Sega games for more than a year. Shortly before announcing its financial losses, Sega announced that it was discontinuing the Saturn in North America to prepare for the launch of its successor. Following five years of generally declining profits, in the fiscal year ending March 31, 1998, Sega suffered its first parent and consolidated financial losses since its 1988 listing on the Tokyo Stock Exchange, reporting a consolidated net loss of ВҐ35.6 billion ( US$269.8 million). Bernie Stolar, former president of Sega of America, in 2009 ДЄs a result of Sega's deteriorating financial situation, Nakayama resigned as president of Sega in January 1998 in favor of Irimajiri, and Stolar acceded to become CEO and president of Sega of America. The games were obviously terrific, but the hardware just wasn't there.' 'I thought the Saturn was a mistake as far as hardware was concerned. As of August 1997, Sony controlled 47 percent of the console market, Nintendo controlled 40 percent, and Sega controlled only 12 percent neither price cuts nor high-profile games helped the Saturn.

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After the 1996 launch of the Nintendo 64, sales of the Saturn and its software fell sharply. Stolar did not support the Saturn, feeling it was poorly designed, and publicly announced at E3 1997 that 'the Saturn is not our future'. Sega announced that Shoichiro Irimajiri would replace Tom Kalinske as chairman and CEO of Sega of America, while Bernie Stolar, a former executive at Sony Computer Entertainment of America, became Sega of America's executive vice president in charge of product development and third-party relations.

Losses on the Saturn hardware contributed to financial problems for Sega, which saw its revenue decline between 19 as part of an industry-wide slowdown. Although the Saturn debuted before the PlayStation in Japan and the United States, its surprise US launch, four months earlier than scheduled, was marred by a lack of distribution, which remained a continuing problem. The Saturn was a CD-ROM-based console that displayed both 2D and 3D computer graphics, but its complex dual- CPU architecture made it more difficult to program for than its chief competitor, the Sony PlayStation. Its successor, the Saturn, was released in Japan in 1994. It sold 30.75 million units, making it the most successful console Sega ever released. In 1988, Sega released the Genesis (known as the Mega Drive in most countries outside North America), their entry into the fourth generation of video game consoles. The Dreamcast was also the first console to include a built-in modular modem for internet access and online play. Its library contains many games considered innovative, including Crazy Taxi, Jet Set Radio, Phantasy Star Online, Shenmue, and Sonic Adventure, as well as high-quality ports from Sega's NAOMI arcade system board. In total, 9.13 million Dreamcast units were sold worldwide.ДЄlthough the Dreamcast had a short lifespan and limited third-party support, reviewers have considered the console ahead of its time. After a change in leadership, Sega discontinued the Dreamcast on March 31, 2001, withdrawing from the console business and restructuring itself as a third-party publisher. Sales did not meet Sega's expectations despite several price cuts, and the company continued to incur significant financial losses. Released in Japan to a subdued reception, the Dreamcast enjoyed a successful US launch backed by a large marketing campaign, but interest steadily declined as Sony built anticipation for its upcoming PlayStation 2. In contrast to the expensive hardware of the unsuccessful Sega Saturn, the Dreamcast was designed to reduce costs with 'off-the-shelf' components, including a Hitachi SH-4 CPU and an NEC PowerVR2 GPU. The Dreamcast was Sega's final home console, with its discontinuation in 2001 marking the end of the company's eighteen years in the console market.

It was the first in the sixth generation of video game consoles, preceding Sony's PlayStation 2, Nintendo's GameCube, and Microsoft's Xbox. The Dreamcast is a home video game console released by Sega on November 27, 1998, in Japan, September 9, 1999, in North America, and October 14, 1999, in Europe.

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