system
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human
ELI5: Why did the SEGA Dreamcast do so poorly?

I remember playing it at a friend's house, and it seemed just fine, and I am told it had a respectable game library?
gpt
So the first strike against the Dreamcast was that SEGA had already flooded the marked over the past half decade+ with far too many half baked pieces of hardware.

The Sega Game Gear(Sega's attempt at a handheld) failed miserably because it was bulky and the battery life sucked.

Then, two major add ons for the Sega Genesis(or Mega Drive), the CD and 32x, were released, and failed miserably.

The Saturn was the next product to come out from Sega, and it too did absolutely atrociously in North America and the European Union, although it wasn't a complete failure in Japan.

So at this point, Sega's reputation is pretty poor; it's released 4 consecutive failures. It doesn't have nearly the developer support that Sony and Nintendo have either.

Then they release the Dreamcast. They go for a first to market strategy in Japan, releasing the console on Nov. 22, 1998, and it works, as the Dreamcast has strong initial sales in their domestic market. That was a two year jump on the next console(the PS2). They released in NA and EU a year later(still one year ahead of Sony), and although the launch was successful, there were several key reasons the system ended up sinking.

1. Sega had a poor reputation after the failure of their previous four attempts, especially in North America and Europe. 

2. Sega chose to use a proprietary format for their discs(GD-ROM), instead of the DVDs that the Xbox and PS2 used.

3. The Dreamcast had weaker hardware than it's competitors. Being released two years early gave it a first to market advantage but all the consoles released afterwards were more powerful.

4. The Dreamcast had poor third party support. There were many gems(Shenmue why you no trilogy?!), but the Dreamcast has ~670 games while the PS2(according to Sony) has 10,000+. A huge thing was that EA Sports titles never ended up on the system. As much as NHL 2k5 is one of the greatest sports games ever, Sega's sports games have always been second fiddle to EA and the Dreamcast era was no different.

4. Dreamcast lacked big franchises to draw in users(Sonic Adventure was terrible). People had to be sold on the merits of the games being made, not on the merits of it's predecessors. The PS2 had the advantage of series like MGS and Final Fantasy. The Gamecube had a hardcore fanbase of dedicated Nintendo fans who bought the system specifically for the purpose of playing Super Mario Sunshine and Windwaker. The Xbox got lucky in that it launched with a killer app in Halo, but it was being marketed by Microsoft, the then biggest company in the world.

As soon as the PS2 launched it slaughtered the Dreamcast in sales(it was a DVD player and had more games), and then the Gamecube came out and drew all the Nintendo fans out of Sega's revenue stream, and the Xbox came and got all the hardware nerds. Things were immediately bleak. The only things Sega had going for it were a small stable of AAA titles and online play. When Xbox Live came out the entire system became redundant unless you just absolutely had to play Shenmue or Skies of Arcadia.