I too am skeptical that piracy was their biggest problem.

I was a Sega fan, but I had no interest in the Dreamcast because I had been burned by the Saturn. When they did eventually decide to discontinue the Dreamcast, they had a fire sale to get rid of them. I, and a bunch of my friends, did end up getting Dreamcasts at that point since they were dirt cheap and there was a fantastic library of games that were easy to pirate. But had piracy been the key issue from the start, Sega wouldn't have been sitting on a glut of unsold consoles to begin with.