The Email That Signalled The End Of The Dreamcast

We recently looked at the steady trickle of press releases that were delivered to media outlets, in which Sega's plans to reposition itself as a third party developer and publisher were revealed. As much as we champion the birth and life of the Dreamcast, the demise of the console and the afterlife which is almost entirely fan-supported is also our bread and butter here at the Junkyard, and sometimes we find ourselves privy to stuff that the public probably wouldn't ever get to see. With this in mind, let us turn our attention to something rather awesome: the actual email from January 2001 that was sent out by Sega of America Director of Development Technology John Byrd, in which the death of the Dreamcast was all but confirmed.

I'm pretty sure that this email has never been published online, and while the middle section is just the standard press release I'm sure you've seen before, the introductory section and - most importantly - the final couple of paragraphs make for some very interesting reading. John Byrd is an industry veteran with over 20 years of experience working in games and you can see the passion for the Dreamcast in his words. That said, there's a lot of stuff in here that never came to fruition - the mention of the set top box being made in partnership with Pace, for example. But this sign off is what really gave me a lump in the throat:

"If anybody has a right to be bitter about DC not becoming the dominant platform, I do. But my job and yours is to make good games for the DC. In that regard, you and I don't have a damn thing to be ashamed about."

Never a truer word said, Mr Byrd. Now, on to the (even more) juicy stuff. Here's the full email, unedited apart from the redacted parts where the recipient's details have been removed. For those who don't know, the term 'elite' was used for those on a particular mailing list - developers and publishers working with Sega on the Dreamcast project.
To make navigation easier, I've split the email into three parts with headings so you can skip past the press release if desired. I also liked the idea of highlighting certain interesting passages in a similar style to that weird-ass book House of Leaves, so that's why some of the text is highlighted in different colours. I decided against making certain paragraphs back-to-front or upside down. I'll leave that shit to Danielewski-San.

Right, grab a cuppa and settle down - this is quite lengthy but damn, is it entertaining...
Part I: The Introduction

Dear elite,

Enclosed is a press release that went over the wire this morning.  As with all press releases, there's a lot of stuff we're not mentioning.  I want to tell you the key things that are NOT public knowledge.

- There's a reduction in price imminent for the Dreamcast system in the US. Expect the price to go to $99 within the next week or so.  In the past, when we've dropped price, we've experienced a nice spike in Dreamcast sales.  It means that Dreamcast systems should be able to compete head to head with PS1 and N64 on store shelves for the next year.

- We're going to stop making new DCs in March because we have enough in inventory now (read: a LOT) to sell one to everyone who we think will want to buy one.  Expect the retail channel to be full through this Christmas at least.  That means you should do what Sega is doing, e.g. develop your games to be ported across multiple consoles.

- The set-top box contains a DC chipset and a hard drive; design isn't finalized yet.  Once it is we'll pass along development information to you.

Sega has been roasted by the media and the fanboys over the past month with rumors true and false.  Ironically, with the new price point DC developers and publishers stand a better chance than ever to make money selling into the DC channel.  I'm afraid that this little fact is going to get lost in the noise over Sega's "demise".

Anybody who's following the TRSTS data about videogame sales will realize that the US videogame market is contracting right now.  Those of you who've been in the industry a while have seen this happen before.  It happened in 1985, 1990 and 1996 when there were multiple game platforms simultaneously competing for consumer dollars.  I have seen several small developers bet the farm on PS2 and they're getting burned badly right now.  Laying aside the religious wars about which game system is "best" for a moment, the DC is the next-gen system with the largest installed base, not PS2, not X-box and not Gamecube.  Think cross-platform and think mitigation of risk.

If anybody has a right to be bitter about DC not becoming the dominant platform, I do.  But my job and yours is to make good games for the DC.  In that regard, you and I don't have a damn thing to be ashamed about.


John Byrd
Sega of America, Dreamcast


Part II: The Press Release



New Company Strategy Gives Sega a Range of Revenue Possibilities and a Path to Profitability; Poised to Become Leading Network Entertainment Company

SAN FRANCISCO - (January 30, 2001) - SegaÆ today announced it would restructure the company to capitalize on its game content -- an area that has been Sega's biggest strength for more than 40 years.  In turn, Sega will unveil a three-pronged approach -- becoming a platform-agnostic third party videogame publisher for game consoles, focusing on its advantage in the networked gaming arena, and becoming an architecture provider of the powerful Dreamcast* chip-set technology to a range of devices including the Pace Micro Technology set-top-box.  By embracing technologies including Java, Sega will also be taking advantage of different publishing channels and will deliver Sega games to Palm* handheld computers and Motorola cellular phones.  With this new strategy, Sega will be significantly broadening its accessibility to consumers and dramatically expanding its revenue possibilities, leading the company to a path of profitability.   

World's Leading Publisher of Interactive Entertainment "Sega is a company that has always dared to innovate and push this industry forward," said Peter Moore, president and COO, Sega of America.  "Sega will continue to do so with its new strategy, and the result for consumers will be what you would always expect from a 'rules-breaker' like Sega - a library of pioneering, jaw-dropping content now available any way you want to play."

Sega plans to ship more than 30 games for Dreamcast in the U.S. this year and a number for other platforms.  The first Sega games to be available on other game consoles this year will include "Virtua Fighter* 4," the "Space Channel 5*" series, the popular "Sakura Wars*" series and two titles from the "Let's Make a Sports Team" series (which has been highly successful in
Japan) for Sony PlayStation*2.  "Sonic the Hedgehog Advance*," "ChuChu Rocket! *" and "Puyo Puyo*" will ship for Nintendo's Game Boy Advance. Further details on availability of these titles will be announced shortly.

Sega will continue to sell through and market the Dreamcast console and its games at retail for the next year.  To help accelerate the transition of Sega from a hardware to a software company, the company has announced a new MSRP of $99.95 for Dreamcast.  The new price point becomes effective on February 4, 2001 throughout the United States and Canada ($149 CND).  In addition, Sega of America will be undergoing a company restructuring as they transform into a third party publisher. 

Sega is already well positioned to become the world's leading publisher of interactive entertainment.  The company has more than 40 years of experience in interactive entertainment, in addition to thousands of Sega developers worldwide creating quality games.  The combination of a greatly expanded installed base provided by other videogame consoles and the world's best developer talent including Yu Suzuki (creator of the "Shenmue*" and the "Virtua Fighter*" series), Yuji Naka (creator of the "Sonic the Hedgehog*"
series, "Samba de Amigo*" and "Phantasy Star Online*) and Hisao Oguchi (creator of "Crazy Taxi*" and "Virtua Tennis*"), Sega is well positioned to become the world's leading videogame publisher.

Alternative Platform Support
Sega will leverage its powerful Dreamcast technology and other technologies such as Java to further the objective of putting Sega games virtually everywhere.  To that end, Sega today announced it will bring its legendary videogame content to Palm handheld computers, and announced a relationship
with Pace, a leading set-top box company.   Under the relationship with Palm, Sega will provide both on and offline games for Palm Powered* handhelds sometime this year. Sega has licensed the Dreamcast technology to Pace, which is creating a set-top box that will play Dreamcast games. Additionally, Sega also announced late last year that the company would bring Java-based games to Motorola phones this year.  

In further support of Dreamcast consumers, many of the 30 Dreamcast games shipping in the U.S. will be exclusive to the Dreamcast console. There will also be best-selling franchises such as "Sonic Adventure 2," "Crazy Taxi 2‘" and "Shenmue 2" coming to Dreamcast this year.  Dreamcast gamers can also enjoy the current library of more than 200 games including hits such as the award-winning "Shenmue," which USA Today called "one of the most immersive and gratifying games around" and the top-selling "Sega Sports* NFL 2K1" and "Crazy Taxi." 

"We have an incredible line-up, key opportunities with other non-gaming devices and a huge combined installed base worldwide for next generation platforms," continued Moore.  "With this in place, Sega is well positioned to become the world's dominant interactive software publisher and the leading network entertainment company given our online strengths."

Networked Gaming and Entertainment
With this new company strategy, Sega will not only be focusing on content, but also the company's networked gaming strengths.  Utilizing's SegaNet* network, Sega will be able to bring network gaming to virtually any platform from other videogame consoles to other Internet devices.  SegaNet delivers additional revenue streams to the company via subscriptions, commerce and advertising.

"As Sega makes its incredible content available across multiple networked platforms and devices, SegaNet is uniquely positioned to create the world's largest game and entertainment network," said Jonathan Kaplan, chief executive officer,   
SegaNet, launched in September 2000, is the world's first high-speed, low-latency console gaming network.  The network, which already has over 200,000 user sign-ups, was designed to support multiple platforms including gaming consoles, PCs, wireless devices, and set-top boxes.  In addition, with the recent acquisition of FamilyWonder, SegaNet is poised to expand beyond gaming content to other forms of entertainment, including music and movies, as it continues to lead the industry with innovative online entertainment offerings.  

Sega's Software Heritage
Sega has been an interactive entertainment leader for more than 40 years. In fact, no other company has had more "firsts" in the $8 billion videogame market than Sega.  Sega created the first-ever arcade simulator game with "Hang On*" in 1985.  In 1990, Sega unveiled "R-360*," the first arcade game to be able to rotate 360 degrees.  In 1993, Yu Suzuki pioneered the 3D fighting game genre with "Virtua Fighter*."  The year 2000 brought other industry firsts including "Seaman*," the first-ever voice recognition videogame in the U.S. and "Sega Sports* NFL 2K1," the first ever online
console videogame.   

About Sega
Sega of America is the American arm of Tokyo, Japan-based Sega Corporation, responsible for the development, marketing and distribution of Sega video game systems and video games in the Americas.  Sega Corporation is a nearly $2.5 billion company recognized as the industry leader in interactive digital entertainment media, offering interactive entertainment experiences both inside and outside the home.  

About and SegaNet, Inc. ( is an online entertainment company that integrates Internet technology and innovation with over 40 years of experience in the video game industry. also built SegaNet (, the only high-speed online console gaming network and community destination for gamers that provides game users with the ultimate in speed, reliability and content.  SegaNet offers both Dreamcast and PC gamers the best in 3D multi-player games, chat, community, cheat codes, tournaments and content.  SegaNet is also a full service ISP offering everything including e-mail, high-speed Internet access and great game content to music, TV, community, movies, sports and e-commerce.  SegaNet is the one stop destination for online games and gaming related content, offering gamers a community built specifically with them in mind.

About Nintendo
Nintendo Co., Ltd., of Kyoto, Japan, is the acknowledged worldwide leader in the creation of interactive entertainment. To date, Nintendo has sold more than one billion video games worldwide, has created such industry icons as MarioÆ and Donkey KongÆ and launched franchises like The Legend of ZeldaÆ and PokÈmon. Nintendo manufactures and markets hardware and software for its popular home video game systems, including the Nintendo 64 and Game Boy - the world's best-selling video game system. As a wholly owned subsidiary, Nintendo of America Inc., based in Redmond, Wash., serves as headquarters for Nintendo's operations in North America.

About Pace Micro Technology
Pace Micro Technology plc is a pioneer of digital technology for the home and has helped build the global market for pay television services.  Using this expertise, Pace is evolving the set-top box into a sophisticated home gateway to enable revenue-generating services for TV and the networked home.
In this networked home, the Pace home gateway is the portal for entertainment and interactive communications around the home and with the outside world.  

Pace analog and digital technology has been installed in over 11 million homes worldwide since it was founded in 1982.  The company is now actively involved in all digital platforms - satellite, terrestrial, cable, wireless and xDSL - through relationships with broadcasters, network operators and technology partners in the UK, USA, Europe, Latin America, Australasia and the Far East.  These achievements were made possible through the commitment of Pace's 1,200 strong workforce, over a third of whom are research and development engineers, dedicated to the development of digital technology for the home and small and home office markets.

Pace's head office is in Shipley West Yorkshire, with further offices in Bracknell, Cambridge, the USA and Hong Kong.  The company's shares are traded on the London Stock Exchange (PIC).  Pace's U.S. operations are based in Boca Raton, Fla. For further information, please visit Pace's web site at

About Sony Computer Entertainment
Recognized as the undisputed industry leader, Sony Computer Entertainment America Inc. markets the PlayStation game console and develops, publishes, markets and distributes software for the PlayStation game console and the upcoming PlayStation 2 computer entertainment system for the North American market. Based in Foster City, Calif., Sony Computer Entertainment America Inc. serves as headquarters for all North American operations and is a wholly-owned subsidiary of Sony Computer Entertainment Inc.

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Part III: The Good Stuff

Since we're all under NDA here, I can be MUCH more open describing Sega's situation to you folks than I can to the general press.  (Sega doesn't respond to rumors, right?)  Here are all the in-the-Sega-family responses to the rumors that I've heard over the past several weeks.

- No, we are not going to stop selling Dreamcast hardware for the foreseeable future.  We have a large number of DC chipsets in inventory at the moment, and manufacture of those will cease for the time being.  Don't worry, everyone who wants a Dreamcast should be able to buy one.

- No, we don't have a development deal with Microsoft, Sony, or Nintendo at this time.  Sega has been talking to those companies specifically about our first-party games, especially for platforms that don't compete with Dreamcast.  If we do such a deal, I'll let you know. 

- No, we are not going to sell ourselves to Nintendo, nor vice versa.(Phantasy Zelda Online?)

- No, we are not giving up on Dreamcast.  I think we have 100 games coming out this year.  As I write this the SOJ hardware teams are currently engineering the DC chipset into other hardware designs, such as DVD players, set-top boxes, and PCI cards.  I think you'll see more venues for developing and targeting your DC games within a year.

- No, Sega is not going away.  Sega has been losing money for several years however and that means we have to change the way that we've been doing business.  We will not turn our backs on our friends.

And as long as it's just you and me talking here: I am sick and tired of all the half-facts that have been slung around about Sega recently.  If you have questions about what we're doing here and how we're going about it, please feel free to send me or Serge an e-mail directly.


John Byrd
Sega of America Dreamcast

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So there we are. The email that signalled that the Dreamcast was to be no more. It's pretty fascinating right? Thoughts? I'm aware that me adding all the House of Leaves references is a bit odd if you've never read the book, so feel free to view the original here (please give us a mention if you use this for your own article though). Also, this comes from a former employee of a developer aligned with the Dreamcast who asked to remain anonymous, hence the removal of all names and references to their identity or employer.

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Blondejon said...

Even though this is an historical document, the deed done the path taken it still hurts a little to read it. Especially because we know that they pretty much did stop supporting the Dreamcast, chosing to cancel projects rather than release games for sale to those who owned the system :(

Playing Mantis said...

What's up with those PCI cards? A dreamcast accelerator card for PC would be great...

DoubleVision said...

If only they did manage to release it in DVD players for a good price it could of competed with PS2

Unknown said...

@jonlee That was my biggest gripe about the shut down of the console. They SWORE up and down that we would get support. So what do they do they end up putting the games on other consoles rather then support the fans who bought their hardware. It gets worse and worse as we find completed games on DC dev kits that were just waiting to be released.

pcwzrd13 said...


MrKnowNothing said...

I find stuff like this fascinating yet depressing at the same time.

I recently found the Sega Annual Report from 2002, which amazingly is still up. It shows the last ever reported Dreamcast console and software sales after its discontinuation. Really interesting read!

Unknown said...

Yeah, I was pretty pissed off when I wrote that e-mail. I was big into clear communication with all my devs, and I didn't pull any punches. It really was a platform of firsts, you know. Still doing video game stuff, by the way -- just focusing on the audio end of things.