I think what did Sega in was the Saturn. Although I love the Saturn and think it had awesome games. The success of the Playstation left everyone in anticipation for the PS2 and that's what the majority held out for.
Also adding the Xbox to the mix didn't help much either. The Dreamcast is a great console and has a ton of arcade goodness but not having that dvd drive didn't help at all. Games like Grand Theft Auto, Devil May Cry, God of War, Final Fantasy X just wasn't going happen on the DC unless they put out like 3+ discs for some of those games. Plus alot of the DC arcade games were available also on the ps2.
The arcade scene was also dieing and most players were gravitating towards those large open world type games. I like the DC but it never had a chance.