It didn't have good third party game titles until it was too late. That's one big issue. Everyone expected it to tank and wouldn't jump on board, then Sega started to tank just as excellent games started to be released for it.
Also, the DC was given the image of a "cartoony" system, whereas the PSX was very realistic looking (despite the fact that their abilities were quite comparable.)
The DC was also a bit of a "too little, too late" scenerio. The PSX had been out for a while before it was introduced, the PS2 was only months away from being released when Sega announced the halt of the dreamcast.