You do realize sometimes software, cannot sale hardware, dreamcast, Xboxone in europe and wiiu are proof of that. like you that was part of the problem, only part of the problem, even you admit that at least were getting some where.
again nobody said being a handheld is the only that mattered, but it will sell significantly more then a stationary home console givin the same software a portable will probably sell double what a home console would. PS4 has sold 10 times the software vita has in japan.
Your explanation doesn't explain why playstation consoles sell much better in Europe the USA, so it's void. Europe and USA, really have similar preferences when it comes to games, except that fifa is much bigger in Europe.
Very bad examples:
Dreamcast: Sega couldn't produce fast enough and cheap enough, and were banking on the software sales to make money. That didn't work out, and Sega had to pull the plug to survive, as the better the Dreamcast sold, the more money Sega lost. Had Sega not been in such a dire position financially, the Dreamcast would have sold better than the Gamecube and OG Xbox.
XBO in Europe: Europe was for a long time a region of PC players, and many still do in parallel to a Sony or Nintendo console. This makes an Xbox however very redundant, since it's games also come out on PC, which most people have.
Wii U: Wii U software couldn't sell hardware because it didn't have software to sell the hardware. Rol asked for the games released in January and February after launch, I checked: a whole 4 games in the US, and even just 3 in Japan - and only one of them not being an Indie title. Without games, there's no reason to buy a console.
As for why Playstation sells better in Europe, it's because they took over Segas players from that region plus all the new ones in the 1998-2004 period of rapid growth since all it's competitors fizzled out for one reason or another, meaning Playstation was their entrance into console gaming. Which meant that by the start of the 7th Gen, Sony had the European console market cornered and by the balls - and then lost their quasi-monopoly with a disastrous launch. But since they owned so much of the market, the loss still wasn't strong enough to kick them from the throne.
The Nintendo eShop rating Thread: http://gamrconnect.vgchartz.com/thread.php?id=237454