There are only two reasons why Dreamcast tanked. It wasn't piracy, bad marketing, or a kiddie label; it was the fact that (1) the Dreamcast came out at a very bad time, and (2) did not have a DVD drive.
Think about it. Dreamcast came out on 9/9/99, a little less than a year from the release date of the PS2. The PS2 was hyped as a machine that can render Toy Story in real time (Sony's own lie) and was the successor of the most popular system at the time. The PS2 was being marketed as a much superior system to the Dreamcast when it really wasn't, and people, so eager to follow the general consensus, took a "I'd rather wait for PS2" approach to the Dreamcast question. It was poor timing of Sega's part, but that was not the biggest reason why it failed...
PS2 was touted as both a cheap game system AND a DVD player all in one. If you look back at the time, you would see that the $299 price point of the PS2 was a steal considering most DVD players were around $300-500. Initially, the PS2 sold because of its DVD function as well as its gaming functionality. DVD was a trojan horse to get PS2s into people's homes. When it was there, the games would sell.
Which brings me to my next point. Dreamcast launched at a $199 price point. Sega at the time did not want to include a DVD drive in it because it would have jacked the price of the system closer to a $299 price point (DVD drives were expensive back then). In retrospect, the idea of Sega including a DVD drive and raising up the price to $299 is not bad at all. In fact, Dreamcast might be where PS2 is now if this would have happened.
When Dreamcast came out, it had the single biggest launch of any system ever up until that time. The marketing was good, the popularity was clearly there. But ever since the PS2s US launch date was announced, Dreamcast's sales began to wane. This might not have occured if the Dreamcast had PS2's secret weapon: DVD. A $299 DVD player that was also capable of playing 128 bit games was unheard of in 1999, and the system would have sold on the sheer value of the DVD aspect alone. It would have done Sony's trojan horse thing for itself.
Not only would the DVD have acted as a trojan horse to get systems into homes, it would have also fended off piracy. DVD writing technology in 1999 was achiac at best, and it was cheaper to buy a new DVD than counterfeit one. This would have helped Sega by not allowing the mass piracy that occurred (later on when Dreamcast was already on it's deathbed) happen until at least 2003, when DVD writing technology became mainstream and affordable.
Overall, I think the decision not to include a DVD drive really killed the Dreamcast in the long run. I believe if it did include DVD, it would probably be at, or surpass, where PS2 is now, considering it came out a year earlier.