With the console race hotting up, everyone suspected that the Tokyo Game Show would start with a bang, but few could imagine that Sega would be the one holding the proverbial gun, aimed squarely at Dreamcast owners. In a shock announcement today, the company confirmed that the North American version of Shenmue II for the Dreamcast has been cancelled, and that the next installment in Yu Suzuki's epic tale will materialize on none other than the Xbox. This deal is exclusive to North America, and the game will still see a Dreamcast release in Europe and Japan. Sega has stated that the specs for the Xbox are being taken into consideration, and that Sega-AM2, the developers of the title, will be optimizing Shenmue II to take full advantage of the new-found horsepower.

Sega's plans for the Xbox don't end there, however. The company also noted that Yuji Naka's highly successful online RPG Phantasy Star Online will appear on the Xbox. The Xbox' integrated broadband access means that gamers will be able to experience lag-free role-playing as soon as Microsoft's network has gone live. This is no doubt good news for Microsoft, providing them with much needed "killer apps" that were in short supply barely a month ago.

"In addition to the numerous Xbox game titles previously announced by Sega, the significance of major titles such as Shenmue II and Phantasy Star Online (working title) being added to the line-up is just enormous," beamed a very pleased Robbie Bach, chief Xbox officer at Microsoft. "Gamers will have the opportunity to enjoy masterpieces by world-renowned Yu Suzuki and Yuji Naka through the powerful graphics, sound and broadband network capabilities of Xbox."

"By bringing Shenmue II and PSO to Xbox, we are bringing Sega's renowned franchises to even more gamers worldwide," continued Peter Moore, president and COO, Sega of America. "We expect that both titles will be killer apps on Xbox and that the technical capabilities of the platform will surely bring both games to new levels in terms of graphics and experience."

This year's TGS is already starting to deliver everything that it promised. Keep checking with RPGamer for more as the show progresses.