I originally had written this as a comment in Derek’s thread, but my response was so long that I opted to make a thread of my own. I can back up my claims with references if need be. Anyway, here goes!

 I think you need to take a lot of different factors into consideration when looking at sales. Its important to be careful when making correlations and saying the causes are the same with no proof whatsoever. MS’ success in the US has little to do with its lack of success in Japan.

Let’s look at the US: for starters, look at the sales of the games. If you compare sales of Resistance vs Gears of War or Halo, you see that the MS FPS games destroy the PS3 series. Why is that? All these titles are made by American companies. The reason is quality of gameplay and multiplayer. The PSN doesn’t compare to XBL and Sony recently admitted XBL’s superiority.  The Xbox provided an experience for core gamers that the PS3 did not.

The PS3 has generally lacked compelling titles in the West to justify its purchase and the PS3 has maintained a very high price tag despite the fact that the quality of the graphics on each machine was usually about the same.  If that wasn’t bad enough, Sony also dropped the ball with its new motion sensing controller and had to release the DS3 after the boomerang horribly failed (Lair?  Its a huge deal that Factor 5 no longer exists and its clear they lost a lot of money when that title fell). Remember that the original PS3 cost over 700 dollars, no games or extra controllers included.  I read this [url] http://www.edge-online.com/magazine/the-making-of-playstation[/url] a few months back and it confirmed that the tragedy with Sony is that the higher ups forgot the lessons they learned with the PS1. Sony dictates to the consumer what it should want and is not listening to its clients in the US. They have become what it is that they stood against in the PS1 days. The PS3’s strategy has been the same as the PSP: Sony made this beautiful piece of hardware  and then had a sense of entitlement that people would buy it and make games for it for that reason without justifying it concretely. The PS3 has been marketed like the PSP since day 1. Part of the reason the PS3 didn’t go the route of the PSP is that at least Blu Ray is nice whereas the UMD was a really bad idea. The PS3 also has a more compelling game library than the PSP, even if it has to share it with the Xbox. This is part of why Bobby Kotick is pissed: he recognizes how Sony is marketing and defending their product.

Its also important to realize that the PS3 originally had TONS of exclusives: GTAIV, Assassin’s Creed, Mirror’s Edge, FFXIII. Had these games remained on the PS3, the Xbox would’ve been a very different beast and it is very likely that Sony’s place in the world would be very different. However, EA, Rockstar and even Square Enix opted to go multiplatform. Valve and others have repeatedly stated that developing for the PS3 is difficult because of the way the memory is allocated. GTAIV cost 50 million dollars to make and was delayed because of difficulties in getting the PS3 version going. Sony did not provide the incentives for exclusivity – even publicly mocking MS for doing so. They have simply not responded positively to the needs of developers and they have paid dearly for it. To be fair though, it would’ve cost Sony a lot of money it didn’t have to do this. The company was in the red last year for the first time since the 90s and the PS3 had eaten all of the PS2’s life profits in its first 2 years. They simply didn’t have the money to throw around and they can’t admit that publicly.

 
For the US, Sony has simply failed to distinguish its game machine from the Xbox and justify its price tag to consumers and Sony has failed to provide the proper incentives to developers to maintain a niche for itself in the market.

And now unto Japan:

Japan is a funny place and I speak of Japan as an outsider looking in. I honestly don’t really know what’s going on beyond what little I have been able to observe a continent and an ocean away on the internet. Having said that, Japanese gaming tastes are extremely different from those of the non-Japanese. This has been confirmed in various interviews by people like Tomonobu Itagaki. From my perspective, it appears as if non-Japanese gamers are more interested in the instant gratification kind of games, whereas Japanese gamers are usually more interested in gamers that require work. If you look at Japan, Pokemon came out a decade ago and it was a hit. If you look at Monster the Hunter series – the sole driver behind Japanese PSP sales- its kind of like Pokemon. Its about grinding parts from monsters just like Pokemon is about looking for monsters. You gotta catch em all. Similarly, the Dragon Quest series was always more popular than the Final Fantasy series and the DQs were always more farming oriented than the FFs. The very idea of entertainment is different in Japan. Developers like Capcom and people like Itagaki have openly stated that they are making games directed at the North American market because there wasn’t as much money to be made in Japan. The result is that Japanese gamers are not getting what it is that they want. I am also under the impression that the idea of HD gaming and movies is not as popular in Japan as in North America. The wii therefore becomes even more attractive because not only is it cheap, but it also doesn’t require the additional cost of upgrading what’s connected to the consoles.

The very fact that the Xbox 360 has a noticeable market presence in Japan is an achievement for MS even if they are being outsold by Sony. MS played its cards right and recruited Mist Walker (Hironobu Sakaguchi) and Namco Bandai (Tales of Vesperia) to make exclusives for the Xbox. These exclusives have resulted in massive sales spikes that resulted in weeks of greater sales for the Xbox. If you take into consideration Monster Hunter’s sales, I think this is indicative of my theory that the Japanese simply aren’t being given what they want. Its easy to say that a Japanese company would sell more in Japan and to blame it on it on "patriotism" if we want to be polite about it. I think that Japanese companies know how to cater to their markets better than non-Japanese companies and the result is the greater sale of Japanese products in Japan. When an American company comes in selling something made in Japan, for Japan, then the Japanese buy it too. It has little to do with the fact that Sony is Japanese.