Nintendo president Satoru Iwata is quizzed on his company's recent third quarter financial results in an investor release Q&A, and one point of focus was the diminishing Japanese home console games market in light of stronger overseas markets. Iwata acknowledges this reality, pinning it on Japanese lifestyles that put less weight on console gaming at home, and instead moving toward the portable scene as evidenced by the relatively stronger performance of the DS and PSP in the country.

"Perhaps, the Japanese market is the least robust market in the world today with regard to home console systems. In the U.S., the home console market is very robust. If the U.S. sold two or three times as much as Japan, it would be tolerable. Yet, I feel that something is wrong when the U.S. is selling ten times as much as Japan on a weekly basis. So, I do not believe Nintendo should be content with the current situation in the Japanese market and believe that we have other methods to confront this."

Nintendo's efforts to address this naturally involved pushing titles unique to a home console experience, in this case leveraging the Wii's functionalities, but here too the company has been stung. The performance of Wii-centric titles like Animal Crossing: City Folk and Wii Music in Japan have not lived up to Nintendo's expectations (assuming expectations were nothing short of complete and utter sales domination).

Wii Music in particular proved to be a down note for Nintendo. Iwata believes that the strength of such titles must rely on the spreading word of mouth through positive play experiences. Unfortunately, Wii Music may not have had the immediate appeal which titles like Wii Sports did, which impacted this initial momentum. On the other hand, titles like Brain Age didn't shatter sales records straight out of the game, but eventually became a bestseller for the DS by the time the sequel arrived.

"At the end of last year, Nintendo launched two Wii titles, 'Animal Crossing' and 'Wii Music,' in hopes that the Japanese consumers would appreciate them and revitalize the Wii market in Japan. Our efforts have not lived up to our expectation. While Wii had very strong momentum in the overseas markets, the Wii market in Japan (during the year-end sales season) showed a slow start, did not show sharp trajectory in sales, and ended up moving back to the sales level of non-sales-season level quickly.

"...what happened at the end of last year in Japan was simply that it did not go as we had planned. To generate strong sales, we need to effectively communicate Nintendo’s messages to our consumers. Of course, the level of sales of 'Wii Music' and 'Animal Crossing' are nowhere near that of failing software. However, because there is a software that clicks with everyone, you get one consumer after another who want to play with it by purchasing the hardware. As these people invite those around them to have the same positive experience, a product spreads."

The NPD Group, Gfk Chart-Track Ltd. and Enterbrain have previously noted a 13 percent drop in the Japanese games market compared to the 15 percent and 26 percent growth seen in North America and Europe respectively, and Japan's conditions were attributed to declining portable and PS2 software sales. As a result, the UK managed to surpass Japan as the second global market for console games last year.