@Risktaking I was not talking about hardware, but software. Homefront cost THQ $50 million and it's failure has hit them hard. This is the problem when even "safe" software has become a major risk.
@Merger I'm not sure there was any better option (Bandai and Namco have infighting, Enix ceased to exist completely, Microsoft would have butchered everything etc) the only issue I really saw with the merger was the change that occured in SEGA's organization, but this is down mainly because outside of AM2 and Sonic Team, everyone was losing money, so only those two remained how it was. A major SEGA game in NA didn't even do more than 5,000 units in sales... It was a terrible terrible time.
@Dreamcast I'm not so sure if the pool would be larger for the DC in terms of chose, the Genesis really had it all even in such a short period. I did a comparision of only console games and SEGA's output during the Dreamcast era was similar to what they have currently, whilst when I looked at the Genesis era, they really had a larger library in any given year.
Homefront wasn't risky, it was stupid, it failed because it was crap. The entire plot was crap, gameplay was below average and the advertising campaign was really corny and poorly received. The sales were fine, and are nearing 2 million. The reason it harmed their stock price was because the metacritic score was low.
http://http://www.computerandvideogames.com/293711/news/homefront-review-scores-cause-thq-share-slump/It was a risk in that it was stupid to ever leave a game with a over-bloated budget in the hands of a mediocre studio whose last game averaged in the 70's as well. This isn't exactly the 'risk-taking' I meant. The game was never going to have anything redeeming about it.
When I say risk I mean innovation, niche, unique and special. Name something special about Homefront? I can't think of anything, it was shite.
@Merger, I get that it had to happen, I am yet again speaking hypotheticals. Though in the realistic instance that it had to happen my dream merger would have been a company like Capcom or Konami, note that I said dream merger. I doubt either company could have afforded SEGA's losses.
@DCERA A lot of stuff is missing from the Dreamcast era, if not in name, in quality; Sonic has decreased in quality (though that looks to be reversing), Space Channel 5, Rent-A-Hero, Rez, Skies of Arcadia, Shenmue, Chu Chu Rocket on a real platform (not iOS, real platforms have buttons), Sega Rally/GT, Fighting Vipers, HotD (on home consoles), Jet Set Radio, if you count arcades Super Monkey Ball has dropped in quality. If we are counting releases from when SEGA was independent still we are missing Panzer Dragoon and Shinobi. We are also missing SEGA Sports.
Furthermore, when discussing that their release lists per year were more impressive on Genesis in regards to number of games made available you have to take into account that 3D game development takes longer than 2D and is more intensive.