In contrast to the expensive hardware of the unsuccessful Saturn, the Dreamcast was designed to reduce costs with off-the-shelf components, including a Hitachi SH-4 CPU and an NEC PowerVR2 GPU.

Many Dreamcast games are regarded as innovative, including Sonic Adventure, Crazy Taxi (1999), Shenmue (1999), Jet Set Radio (2000), and Phantasy Star Online (2000).

[4] Although the Saturn debuted before the PlayStation in Japan and the United States,[5][6] its surprise US launch, four months earlier than scheduled,[7][8][9] was marred by a lack of distribution, which remained a problem.

[24] As early as 1995, reports surfaced that Sega would collaborate with Lockheed Martin, The 3DO Company, Matsushita or Alliance Semiconductor to create a new graphics processing unit, which conflicting accounts said would be used for a 64-bit "Saturn 2" or an add-on peripheral.

[37] Jointly developed by Sega and Yamaha, the GD-ROM could be mass-produced at a similar price to a normal CD-ROM,[31] avoiding the greater expense of newer DVD-ROM technology.

[28] According to Katsutoshi Eguchi, Japanese game developer Kenji Eno submitted the name and created the Dreamcast's spiral logo, but this has not been officially confirmed by Sega.

[45] Because the Saturn had tarnished its reputation, Sega planned to remove its name from the console and establish a new gaming brand similar to Sony's PlayStation, but Irimajiri's management team decided to retain it.

[28] However, Sega could not achieve its shipping goals for the Japanese Dreamcast launch due to a shortage of PowerVR chipsets caused by a high failure rate in the manufacturing process.

[29][61][62] According to Moore: "We needed to create something that would really intrigue consumers, somewhat apologize for the past, but invoke [sic] all the things we loved about Sega, primarily from the Genesis days.

[71] As part of Sega's promotions of the Dreamcast in Europe, it sponsored four European football clubs: Arsenal (England),[72] Saint-Étienne (France),[73] Sampdoria (Italy),[74] and Deportivo de La Coruña (Spain).

[105][107] Sega employed aggressive pricing strategies around online gaming; in Japan, every Dreamcast sold included a free year of internet access, which Okawa personally paid for.

[115] While the PS2's October 26 US launch was marred by shortages, this did not benefit the Dreamcast as much as expected; many consumers continued to wait for a PS2, while the PSone, a remodeled version of the original PlayStation, became the bestselling console in the US at the start of the 2000 holiday season.

"[61] The staff of Newsweek wrote that "from Sonic to Shenmue, Sega's programmers have produced some of the most engaging experiences in the history of interactive media ... Unshackled by a struggling console platform, this platoon of world-class software developers can do what they do best for any machine on the market.

[31] Graphical hardware effects include trilinear filtering, gouraud shading, z-buffering, spatial anti-aliasing, per-pixel translucency sorting and bump mapping.

[143] It received mostly negative reviews from critics; Edge described it as "an ugly evolution of Saturn's 3D controller",[150] and was called "[not] that great" by 1Up.com's Sam Kennedy[151] and "lame" by Game Informer's Andy McNamara.

[159] The Japanese Dreamcast port of Sega's Cyber Troopers Virtual-On Oratorio Tangram supported a "Twin Sticks" peripheral, but its American publisher, Activision, opted not to release it in the US.

[160] The Dreamcast can connect to SNK's Neo Geo Pocket Color, predating Nintendo's GameCube – Game Boy Advance link cable.

[167][168] In addition, Sega investigated systems that would have allowed users to make telephone calls with the Dreamcast, and discussed with Motorola the development of an internet-enabled cell phone that would use technology from the console to enable quick downloads of games and other data.

[181] In what has been called "a brief moment of remarkable creativity",[4] in 2000, Sega restructured its arcade and console development teams into nine semi-autonomous studios headed by their top designers.

[39][193] Sonic Team also developed the Dreamcast's first online game—ChuChu Rocket!—which was praised for its addictive puzzle gameplay and "frantic" multiplayer matches,[194][195][196] and the critically successful music game Samba de Amigo, which was noted for its expensive maracas peripheral and colorful aesthetic.

[4][204][205] Smilebit's Jet Set Radio, in which players control a Tokyo gang of rebellious inline skaters, is cited as a major example of Sega's commitment to original concepts during the Dreamcast's lifespan.

[4][212][213] AM2 developed what Sega hoped would be the Dreamcast's killer app, Shenmue, a "revenge epic in the tradition of Chinese cinema",[19][214] with a level of detail considered unprecedented for a video game.

[215] Incorporating a simulated day-and-night cycle with variable weather, non-player characters with regular schedules, the ability to pick up and examine detailed objects, and introducing the quick-time event in its modern form,[215][216] Shenmue went over budget and was rumored to have cost Sega over $50 million.

[29][222][205] Madden and 2K continued to compete on other platforms through 2004, with the 2K series introducing innovations such as a first person perspective new to the genre,[223] and eventually launching ESPN NFL 2K5 at the aggressively low price point of $19.95 until EA signed an exclusive agreement with the National Football League, effectively putting every other pro-football game out of business.

[230] NAOMI shares the same technology as the Dreamcast, with twice as much system, video, and audio memory and a 160 MB flash ROM board in place of a GD-ROM drive, allowing nearly identical home conversions of arcade games.

[4] The Dreamcast also used parts similar to those found in personal computers with Pentium II and III processors, allowing a handful of ports of PC games.

[240] Its accompanying web browser, Dream Passport, provided the ability to connect via dial-up, browse the internet, receive and send e-mail, and chat with other users.

[271] In 2013, Edge named the Dreamcast the tenth-best console of the last 20 years, highlighting innovations including in-game voice chat, downloadable content, and second-screen technology through the use of VMUs.

"[167] 1Up.com's Jeremy Parish favorably compared Sega's Dreamcast output, which included some of "the most varied, creative, and fun [games] the company had ever produced", with its "enervated" status as a third-party.

"[275] Jeremy Parish, writing for USgamer, contrasted the Dreamcast's diverse library with the "suffocating sense of conservatism" that pervaded the gaming industry in the following decade.