Troubled video-game maker Sega finally bowed to the inevitable and announced that the company will discontinue production of its Dreamcast game console so it can focus on creating software and returning to profitability. But Sega will take a massive loss of $688 million to unload the Dreamcast hardware, which has already caused losses of almost $1 billion during the past few years. Although the Dreamcast has sold relatively well, it did poorly compared to the competition, most of which wasn't as technically sophisticated. And Sony's PlayStation 2 (PS2) and Microsoft's Xbox are expected to compound Sega's problems.
Sega says it explored several options for the Dreamcast, but that exiting the hardware industry made the most sense. The company now will focus on porting its existing library and creating new games for other game consoles and the PC. Sega says that the PS2 and Xbox are obvious choices, and rumors this week suggest that, when it's released this fall, Microsoft's Xbox might even include the ability to natively play Dreamcast games. Sega has been producing video-game consoles since the mid-1980s, when its Sega Master System performed poorly against the Nintendo Entertainment System. Sega dominated the 16-bit generation, however, with its Genesis machine, before succumbing to its current problems with a series of disasters that included the 32X, the Saturn, and finally, the Dreamcast.
The Dreamcast shipped with an embedded version of Windows CE so that developers could more easily port Windows titles to the console. Few game makers took advantage of this feature, however, and Microsoft later decided to go its own route with the Xbox, ending its partnership with Sega. The Dreamcast was the first game console to offer Internet access and the first to offer a broadband Internet adapter