The Unreleased Dreamcast That was Years Ahead of Its Time

By Kotaku on at

By Richard Dobson

In 2001, the Dreamcast's short-lived popularity was already on the decline. SEGA had a new president who was saying openly the company should get out of the console business and later that year it announced it would stop manufacturing the Dreamcast altogether. However, at the same time, SEGA signed a deal with a manufacturer in Leeds to make a machine that was leaps ahead of the competition: a console with an internal hard drive, a digital marketplace, and even game streaming (years ahead of that being a thing).

The deal was struck with a company called Pace (now called Arris International), a set-top box manufacturer based in Leeds. Utilising the technology Pace were designing, and combining that with the power of the Dreamcast, was, in retrospect, incredibly forward thinking. Back in 2001 recording TV shows to an internal hard-drive was still a novelty. Pace was designing personal video recorders (PVRs) with 40GB hard drives to do that, and companies such as Comcast and Sky were ready to offer these to their customers. By adding a Dreamcast circuit board into the same design (and early prototypes were just that with everything crammed crudely into the one chassis) games could be stored on the hard drive as well as the TV shows.


Photo credit: The Dreamcast Junkyard.

Figure 1: The final product would have shipped with a single Dreamcast controller also

It was decided from the very start that the games were to be downloaded to the system rather than played from the Dreamcast GD-ROMs, and as a result, the disc drive for the Dreamcast was removed altogether. It saved on space but it’s a move that would have alienated existing Dreamcast owners whose library was on disc. The intended market, however, was made up of people who wanted premium TV but also a passing interest in gaming. This meant that all games had to be downloaded from the internet at a time when most households were still running on dial-up connections. As such this Dreamcast had a built-in modem as standard, despite objections that this would increase the price of the console by over $15 at the time.


Photo credit: The Dreamcast Junkyard.

An ex-Sega employee, who later joined Pace coincidentally, remembers joining the two designs together: “Combining the two circuit boards proved to be fairly easy as they were separate entities for the most part." The major change the team had to make was to get the Dreamcast to act as a slave to the set-top box. "This helped the UI of the product with a picture-in-picture mode allowing the games to be selected from a menu with a help of a rolling demo. This meant the Set-Top Box was connected to the TV via the Dreamcast rather than the other way round.”

The teams were only given a few titles from the Dreamcast back-catalogue to test the set-top console on, but they were some of the consoles biggest. “[SEGA] provided Ferrari 355, Sonic Adventure and Crazy Taxi that I hacked to change the video modes to demo the box”, the employee continues. “We did 2 demo units that went to US." At that stage they were still ironing out a few bugs: "I remember lots of green wires that kept dropping off for some reason.”

These games were some of the Dreamcast's biggest sellers, and despite being rather a small selection it was evident that the project was being taken seriously. Members of both Pace and Cross Products were even sent to Tokyo to meet Sega Chairman Isao Okawa in the summer of 2000.

One noticeable omission from the starting line-up was Shenmue, but due to early 21st-century internet speeds (for those households that even had the internet), this would have taken longer than a lap around the Nürburgring in a forklift. However, the plan was to let the broadcaster determine which games were available to download in their respective region, so its absence would not have lasted too long.


Pace and Sega had high aspirations for the project including tiered subscription models for the downloadable games,  and a very basic eSports idea that could be streamed to other owners of the box - a whole five years before Twitch parent company Justin.TV was even a thing. With all these great ideas then, just what went wrong?

Well, rumours had been circulating that the Dreamcast was going to stop production just two years after its launch in Japan. In March 2001 this turned out to be true when long-time Chairman of Sega Enterprises Isao Okawa, who had been keen for Sega to leave the hardware business, passed away. “The announcement highlighted the economic difficulties”, a former Pace employee recollects that the writing was already on the wall. Sega allowed existing suppliers to continue to work on hardware contracts which allowed Pace and Cross Products, a third-party company SEGA contracted, to continue. Sadly, this came to a close at the end of 2001 as Pace could not secure customer contracts at their end. “The underlying technologies were on different timescales and unlikely to converge soon – games consoles competing on bleeding edge hardware and set-top boxes focused on feature integration and cost reduction”, he continues. Sega was looking for other set-top manufacturers to work with, but the feeling is that it was too much of a risk to work.

Another reason could have been Cross Products being acquired by Imagination Technologies Group separating it from Sega, a relationship formed through the design of the PowerVR chip that powered the Dreamcast. This acquisition was announced in September 2001 with the set-top hybrid being officially canned in December. No link has been formally made between the two events, but with a new leadership team in place, it is likely the decision was made to cut their losses. Combine these two possibilities and it always seemed like the fate of this hybrid was set in stone.

The ideas that this partnership brought forward were revolutionary at the time, and it’s only with looking back we see how forward-thinking the whole design was. It would have been the first console to use an internal hard-drive as the original Xbox, whilst announced, was still un-released. It offered downloadable games and a subscription service, things that are commonplace now for consoles with EA Access, PlayStation Now and the upcoming Xbox Games Pass.

The teams had great ideas for further plans that seemed way ahead of its time as well, but perhaps they were considered just a bit too outlandish at the time, and it was decided the risk wasn’t worth it. Remember this was at a time when gaming wasn’t this massive juggernaut it has become, and indie meant bands such as The Strokes, Bloc Party and The Hives. But it was not to be. The Dreamcast fizzled out and will forever be remembered as the console that could have been, rather than was.