The sad things was, the DC was actually selling quite well. It just wasn't selling well ENOUGH to save a company already teetering towards bankruptcy before the DC even launched.
SEGA didn't just need to be a hit... it needed to be a MONSTER. There are articles floating around online where ex employees and management talk about the truly insane sales targets SEGA would have actually needed to hit (in an incredibly short amount of time) to save the company before it ran out of money. They probably couldn't have hit those targets even if the PS2 had been delayed a year, let alone in the face of a strong direct competitor. A solid second place could have worked for a healthier company but SEGA needed nothing less than a totally unprecedented industry success just to stay afloat. Meanwhile, companies like Microsoft were willing to spend an entire generation losing money just to get a foothold into the marketplace.
When it was clear those targets weren't going to happen, they had no choice. They ended DC production and exited the hardware business because doing so allowed them to immediately and dramatically reduce expenditures and use those savings to keep the rest of the company afloat instead.
SEGA didn't just need to be a hit... it needed to be a MONSTER. There are articles floating around online where ex employees and management talk about the truly insane sales targets SEGA would have actually needed to hit (in an incredibly short amount of time) to save the company before it ran out of money. They probably couldn't have hit those targets even if the PS2 had been delayed a year, let alone in the face of a strong direct competitor. A solid second place could have worked for a healthier company but SEGA needed nothing less than a totally unprecedented industry success just to stay afloat. Meanwhile, companies like Microsoft were willing to spend an entire generation losing money just to get a foothold into the marketplace.
When it was clear those targets weren't going to happen, they had no choice. They ended DC production and exited the hardware business because doing so allowed them to immediately and dramatically reduce expenditures and use those savings to keep the rest of the company afloat instead.