At the Tokyo Game Show today, Sega have announced that Shenmue II will be an Xbox exclusive, and that production of the title for the Dreamcast has been suspended in America.


The deal between Sega and Microsoft will see the two companies working closely together, with Microsoft providing full marketing support for Sega titles which are released on to the Xbox.

"This agreement with Microsoft will give 'Shenmue II' and 'Phantasy Star Online' the marketing prominence and increased awareness that the titles deserve, while giving Sega access to significant incremental revenue as we work toward profitability goals for this fiscal year and onward," said 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."

However, the good news for European Dreamcast owners is that the European release is still on for Shenmue II, and has been confirmed for later this year.