These are all great points that I missed and agree with. Even if Sega had held on I still see them bowing out at some point.
Your stance on piracy not hurting the DC is in the minority, but I happen to agree with it 100%.
It definitely hurt Sega the company. That is money coming off their bottom line, and they were already losing money on every DC sold due to price cuts, not to mention losing money on Seganet because they offered a lot of free one year sign ups to try and encourage sales.
Without the piracy maybe they have enough in the bank to limp on for another couple of years.
We seem to be on the same page that the software piracy doesn't seem to have a direct correlation to poor hardware sales that prematurely killed the system.
I mentioned it another post, but it gets lost in the shuffle of their great North American launch, that their Japanese launch was a just a complete mess that cost them a lot of valuable lead time on Sony and a lot of money in the above mentioned price cuts.
It did make me wonder if Sega could of done things just a little differently they could of stayed afloat with an heavy North American focus like the Xbox eventually did.
Especially if they somehow managed to bad a big FPS and tie it into Seganet like Microsoft eventually did with Halo and Xbox Live.
My guess is even then they would of needed to form a hardware partnership with Microsoft to do that though. I have read Microsoft was open to some kind of partnership early on before Sega completely fell apart.