It's been revealed that Sega's Chairman of the time, Isao Okawa-san, visited Microsoft's Bill Gates several times as part of a last bid effort to save the now much loved console.
 
 
 
 Kotaku is reporting the following:
 

There have been rumors for years that Microsoft planned to buy Japanese game maker SEGA. But did you know SEGA hoped to make the original Xbox compatible with Dreamcast games?


The SEGA Dreamcast was launched in late 1998 to great fanfare. The console — featuring dial-up online — was years ahead of its time. Then the Sony's PlayStation 2 launched, and the SEGA console never recovered.


SEGA Chairman Isao Okawa was not willing to go down without a fight. "Before Mr. Okawa passed away," tweets former Microsoft exec Sam Furukawa, "he visited Gates several times, to see if it would be possible to add Dreamcast compatibility into the Xbox." According to Furukawa, Okawa was offering the SEGA assets to Xbox, it seems, which would create a path for Dreamcast customers to migrate to the Xbox.


Even if the Dreamcast was dying, this move would keep the platform alive and maybe even give it a second wind.


Okawa insisted that internet was indispensable for the Dreamcast games, it seems, but Microsoft didn't want an internet connection for the Dreamcast titles and negotiations fell apart.


(Of course, Microsoft pushed online gaming for its own Xbox titles; however, one has to wonder what expenses it would incur by not only making its Xbox play DC games, but play them online.)


Furukawa says that Okawa negotiated with Gates himself, but he was unable to work out a deal to pass on the Dreamcast customers. Before Okawa, Furukawa adds, he gave over roughly US$ 900 million from his personal fortune to SEGA in order to keep the company afloat.


Okawa passed away in Tokyo on March 16, 2001 due to heart failure. He was 74. The Dreamcast went out of production later that year. The chairman who followed Okawa decided that SEGA should focus on software production.


SEGA of America exec Peter Moore, the man who has admitted to making the decision to stop producing the Dreamcast, joined Microsoft in 2003.


CSK Holdings, the company Okawa created, owned the major stock share in SEGA until 2004 when CSK's shares were bought by Sammy, a pachinko company. And Microsoft continues to struggle in the Japanese market.


Furukawa is currently a professor at Japan's Keio University.


幻に終わったXboxのドリームキャスト互換・今明かされるその理由 [Kotaku Japan]
  

Sought?
 
But, yes, a very interesting read.  That Moore is one devious man.

That makes sense.  My Xbox came bundled with Sega games.

" Sought?  But, yes, a very interesting read.  That Moore is one devious man. "

This would've been an interesting crossover, and it would've been nice to see some of the SEGA IPs move forward into their own series. However, I guess that placing Dreamcast backwards compatibility would take time and probably wouldn't have been worth the effort in some regard.

It was always telling that one the earliest titles on the XBOX was Shenmue II.  If the deal hadn't gone bad I think the XBOX would've jumped quite few more steps to catch up with the PS2.

That's a crazy story. Wonder how come it's taken this long to emerge. Never knew that.

Sega worked directly with  Microsoft to make the Dreamcast so this isn't a shock. Hell one of the early Dreamcast prototypes was made almost entirely by Microsoft and most likely was the jumping off point for the Xbox.

This totally gives a better explanation as to why games like Shenmue II, Jet Set Radio Future, and other titles from Sega were so prominent in the beginning of the Xbox's life. 
 
Great read, and thanks for sharing, Linky.

Oh my god, this kinda makes a lot of sense actually. God what a tragedy, the 'cast had so much potential.

" Sega worked directly with  Microsoft to make the Dreamcast so this isn't a shock. Hell one of the early Dreamcast prototypes was made almost entirely by Microsoft and most likely was the jumping off point for the Xbox. "

" @Atramentous said:

" Sega worked directly with  Microsoft to make the Dreamcast so this isn't a shock. Hell one of the early Dreamcast prototypes was made almost entirely by Microsoft and most likely was the jumping off point for the Xbox. "

Really?  As far as I knew the only direct involvement in the DC from MS was twofold :  WinCE which would extend the capabilities for it become a loungeroom PC and their MSVC SDK environment. "

Why don't they do this now? Anyone that still has dreamcast games should be able to play them. It would be sweet. Microsoft would soooooo be in business in Japan.

" @SeriouslyNow said:

" @Atramentous said:

" Sega worked directly with  Microsoft to make the Dreamcast so this isn't a shock. Hell one of the early Dreamcast prototypes was made almost entirely by Microsoft and most likely was the jumping off point for the Xbox. "

Really?  As far as I knew the only direct involvement in the DC from MS was twofold :  WinCE which would extend the capabilities for it become a loungeroom PC and their MSVC SDK environment. "

In those days I was a pretty hardcore Sega fanboy. We did allot of research and whatnot into this stuff. It had come out at one point that there were 3 versions of what became Dreamcast. One of them was nearly a PC by the standards back then and it was Microsoft's project. Then again all this could be completely wrong because all those old Sega sites have long since gone and I cant find anything on it. I do remember some of the code names for these proto's though. Katana and Dural were two of them. Katana went on to become the name of the DC dev kit I think, and Dural and arcade board or something.  Either way its a pretty safe bet that Microsoft's jump into consoles would have gone differently or maybe not even happened at all if it wasn't for Sega. "

Maybe this explains why Sega made such niche games like Gunvalkyrie and JSRF for the Xbox.

Oh the tragic story of Sega.