Unfortunately I think that Sega themselves weren't the only group lacking confidence in the Dreamcast. In fact, I feel like they put up a valiant fight, with marketing and first-party titles.

Critics and consumers all had an extremely "wait and see" attitude that I think took the theoretical advantage of the incredibly early launch and turned it into a huge liability. People didn't want to commit to buying their next console without seeing what the other offers were going to be. So Sega had to work hard for about two years to keep the real and actually available Dreamcast positioned high in the market while their competitors had the luxury of showing jaw-dropping demos of "potential" hardware (i.e. "Here is some video produced on $50,000 graphics workstation hardware that is made by the same company that's currently in talks to produce our GPU.")

Third-party publishers also didn't want to put any serious budget toward producing games for the Dreamcast, because they didn't want to gamble real money on the install base increasing. This resulted in several low-effort PS1 ports that made very little use of the Dreamcast hardware, which in turn lowered consumer opinion of the console. When some of these games were later ported to PS2 as "upgraded" or "enhanced" versions, that only further entrenched the poor image of the Dreamcast.

I have owned all four major consoles of that generation since they were still having new games published for them. And if I had to choose only one console to keep from that group, it'd be the PlayStation 2, because of the game library. It's huge and varied. I have literally hundreds of games for it, while I only have a few dozen games for the others. But looking at the average quality of the graphics and sound in the games for those systems, I'd also rank the PS2 in last place, even behind the DC.

Sony was a massive juggernaut in the console gaming market at the time. The PlayStation 1 had taken the worldwide market by storm, and become the defacto standard console. It's easy to forget that the console launches for this generation were unusually spaced out over a four year period, and Sony was the company best positioned to turn that to their favour. People weren't going to buy a DC without seeing the PS2, but once they did, many were happy to buy a PS2 without waiting for Nintendo or Microsoft to release their consoles. The added ability to play DVDs at exactly the time when that market was hitting its stride (and more affordably than many dedicated DVD players) absolutely boosted their sales in a big way. Nintendo's GameCube didn't do that, and by the time the original X-Box came to market, it wasn't nearly as much of a consideration.