I love good posts so I'll reply to this one with extra care and deliberation.
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@JohnLucas,
Hardware & Software
I think it's interesting to see if it is hardware or software that has a greater effect on gaming trends, what nintendo did with the Wii was to try and make software (games) easier to use by giving the user a natural interface to work with, this is highly interesting as Software developers must now try to adapt and create games that use it in a interesting or at least simple way.
Sony and Microsoft have made HD standard and this also makes Software developers adapt and increase texture sizes and add other graphical improvements
Here are cases of Hardware controlling/ influencing software.
And yet the heart of the game market are the games, the developers write the games, the successful games get copied and therefore they change the industry, even now you see Japanese companies making more and more Western style games as Japanese are no longer buying the same kind of games as they used to.
The Japanese developers/publishers are going far more international as they see the profits that can be made from these kind of games in the US and Europe and so the Japanese market is less important.
Well in the realm of consoles/handheld consoles the design of the hardware shapes the direction of the software. This is what Nintendo uses to perfection. And videogaming is dependent on interface and control being dynamic from generation to generation to maintain itself.
There's no question that ultimately it's the games that make the system but it IS the system itself which determine the style and type of games that may come out on a system. You're not playing Trauma Center: Under The Knife without that DS stylus interface & you're not playing Trauma Center: Second Opinion without that Wiimote. It all starts from a system vision and then the games come from there. And as you noted Sony & Microsoft's push for HD standards shape the style of games on their systems.
Software adapts to the system it plays on. Hardware by name is the hard boundaries where the soft creamy filling, the software, bounds around in. You couldn't legitmately play Gears of War on a Atari 5200 for graphical or control reasons. So the platform is never irrelevant just not the ultimate of what decides a generation. Hardware is the start and software is the finish.
Now moneywise it's smart to create games for the non-Japanese markets since much of your buyerbase is from there but still Japanese buy Japanese-centric games. I mean would you ever see TOEIC Test Training sell in UK or USA? How about all those Japanese history games on the DS? Hell, how about Wii Fit?! That's made precisely with the Japanese in mind first! It's so different to many Westerners that many of them still can't wrap their minds around it as a concept not realizing its potential as a result. Of course I'm not one of those folks. 
I don't think it's a matter of the Japanese seeing the Japanese market as less important. I think it's more Japanese developers wanting to become more inclusive of all markets at once. Creating something that appeals to all from the start not made for Japanese and then localized for foreign markets later.
Looking back at Nintendo history as I wrote that last post I think I figured out part of where they went wrong. The Famicom was made with Japanese in mind only, designwise & all. They changed the outer aesthetics and localized it for us as the NES. In Japan the Famicom was approaching what the Wii is fulfilling now: a literal Family Computer which games and gets used for news and even the stock market. But over here we just saw it as a fun gaming system. Famicom had much more meaning in Japan as a product.
Then came the Super Famicom which was doing satellite service with Satellaview and all this. The aesthetics and style appealed to the Japanese which it was made for first. We got the localized version known as SNES which once again was just seen as a fun game system.
Nintendo tried to unify the different power market regions into one by making one name & one design for all with the N64. I think for the first time they didn't create it designwise with the Japanese in mind first & Sony's PS1 which came out of the union between them & Nintendo in the first place still had that appeal to the Japanese which allowed them to come out on top. For the first time Nintendo lost power by trying to appeal a little more to the Western markets instead of appealing to Japanese first and then translating the vision later.
Gamecube continued this tradition where Nintendo seem a little schizo about who they were trying to appeal to. A big boxy cube which didn't appeal to much anybody especially the space-conscious Japanese. Trying to make it toyish & fun which may appeal to Japanese but not in dimension being cube like. At the same time being too toyish for Western tastes.
Nintendo went back to its roots and designed the entire philosophy behind DS & Wii around Japan first. Studied the demographics of the region and all. Japan is rapidly aging. The naming conventions, the aesthetics, the market targets, everything. Those two were made with Japan in mind first and then taken over to other regions. Only now since cultural exchange has taken place between the countries for so long there was no need for an alternate design or name. The Japanese minded Wii & DS appealed to non-Japanese lands as well. But remember how at first everybody hated the name Wii? How they thought it would be gangbusters in Japan but Revolution would be better here? That's trademark Western myopia. If Nintendo tried to appeal the Westerners first, the Wii would be Black colored with the name Revolution. And that would have hurt its chances in Japan losing more developer support in the process.
You claim that Europe suffers from Game delays and yet many games from European and US developers are released far later in Japan then even in Europe. I do agree that VAT plays a role in the extra costs and this effects sales, but the "language complexity" you speak of is due either to see how well the game sells in one region before selling in another or simply bad company management as you can do translations in parallel to game development , why is it that some games have World wide releases and others do not? Why are all PC games created in the US released here almost without delay? As Europe becomes a larger market we will see games being released in Europe and the US concurrently At the moment there is no room in the business for a European gaming console and until eastern Europe user base is of a decent size there won't be, but in the future as gaming grows, as it will do, and if the economic situation keeps on improving (which hope!), there is still a possiblity that it might happen, but I think it would be an international venture as the costs are sky high, but so are the gains.
Management is indeed a problem on game distribution & I hope people improve this for the growing & rich European market. I imagine PC is easier because things can be patched later. Consoles and the games are largely fixed from off the storeshelves. Also PC market is lucrative in Europe. PC market looms over the future of consoles. As soon as consoles recede PC comes in to take their place. Videogaming is an industry always in danger of extinction without constant care. This whole thing can become computer based at anytime.
I do want to see more closer release dates for Europe & I think we're getting there but I think local politics with importing & tariffs make things difficult too. Also Japan only has to cross the Pacific by boat to get to North America. They have to fly across lands to get to Europe. I think boat is cheaper than plane which probably explains the problems with releases. Plus ships can go in worse weather than planes can. Australia shouldn't have any delays being so close to Japan but their problem is being an Anglo-based country out of place in a SE Asian world. Plus their population is smaller. They're sort of out of place logistics wise.
To be honest I actually see Europe throwing their hat into the console ring in the 8th generation. I feel somebody is going to drop out of gaming after this gen one way or another & maybe some European company will take a stab at videogame consoling. Either handheld or home console. If Europe cannot support making a console then that is my point about them not being able to become more important to the industry than Japan. Sales are not the only consideration, it's the ability to prop up an industry altogether which makes you important. Japan has two console-makers. Two. Sony & Nintendo. USA has one. Microsoft. Without the makers you can have all the games in the world but no one will be able to play them. Most companies even the big 3rd parties stick to just making games because it is hard to keep up that pace on hardware/software. It's a tough business and takes a whole new level of planning and strategy. Big sales from regions means bigger content representation on a console but it does not mean the unimportance of the country where the console comes from. Somebody has to make the player. The only other player there is outside of that is the Computer.
The combined Total of all Next Gen consoles (Wii, PS3 and Xbox360): Japan: 5.6 Million, population is 127 Million - 0.044 consoles per person UK : 3.4 Million, population is 61 Million - 0.05 consoles per person. Now take into account that the PS3 was released 4 months later in the UK and that for a long time it had less shipments of the Wii then japan did.
I got owned on that one. Have to take that comment back about Japan being the bigger buyers now. This means that UK gaming will have a greater representation on consoles. But it still does not make them more important than Japan as a market. It becomes another valuable piece that enrichens the market but that doesn't mean it controls the entire flow of the gaming industry. My take on importance is on the matter of industry direction control not sales. USA's big sales don't fully control the industry direction either though it does have some impact. Other regions have impact but Japan still controls much of the direction the industry takes.
I agree that China will have a massive effect on gaming, but instead of it being driven by Japan, I can imagine in 10, maybe 20 years time China would of created it's own gaming console, they will have the money and an untapped market that is asking for games that cater to it's tastes. I think it might even be supported by the Chinese Goverment because they don't want Japan having so much power in a single market, think about the fact that the chinese don't use windows. They want home grown games and a home grown console that they can control also add in the fact they can produce it cheaper then in Japan. The only question is, will they go international.
With stuff like Vii I don't doubt it. This is the land of...(Principal Skinner pause)...Counterfeit Jeans after all. 10 or 20 is a long way off though and in the meantime Japan will indeed be important to the China game market. Hey the fact that Vii exists points directly to that. I certainly don't see a XBoy 360 as a counterfeit tribute to Microsoft's machine.
China's government control is indeed a real concern which is why the iQue brand exists to begin with. China has the money now actually with all the money they get manufacturing the world's goods. But the hurdle there like many places is the PC. Where consoles don't exist PC does. And PC makes consoles irrelevant if they don't differentiate themselves enough.
The government is the obstacle here because China is a ripe market to be plucked from the gaming tree. The controlling tactics will be the impediments to progress here and I don't think much else. And I don't doubt that they'll become console designers in the future putting out games to influence loyalty and such. I don't think they'll go international either. But with 1 billion people do you really need to?
What you have said makes a lot of sense but I think your too focused on the past, Nintendo can loose it's control as quickly as sony has, it only takes a blue ocean idea (and loads of cash) and that might just come from Europe or china in a future you haven't imagined.
Well this is where I disagree. Even though Japan has two consolers only one is the real engine behind the business and that's, you guessed it, Nintendo. Sony took what it learned from them and added in their own talents to create the Playstation dynasty. But that dynasty was never run as efficiently as Nintendo's was and is. Sony's a giant corp with record selling systems that only profit a little bit in proportion. Nintendo's a 3000 employee worldwide corp with profit strong enough to rival two corporate giants in the videogame realm! And with each innovation like wireless Wavebird, functional Analog sticks, triggers, color coding, motion sensing the other companies follow.
If Nintendo loses control you'd know it because the industry would be soon to follow if they met their demise. Nobody yet has proven that they can carry this baton. This is a very difficult business to maintain. Always in threat obsolencence, constantly called upon to keep things new and fresh, in need of strong business models to ensure the most sales and profits free from pirates, logistics planning, and all that.
Will this one day change? It's possible but until someone proves themselves I don't see it happening. One thing to enter the arena, another thing to be the driving engine behind it. To really drive this industry it takes a little more than just making a playing machine. It takes imagination, business savvy, fresh ideas, intelligent philosophy, smart design, craftsmanship. Someone has to do what Nintendo's doing on every front in order to take the crown & I simply don't see that happening. Until that time Nintendo with its fellow Japanese competitors and developers will keep Japan as the center of the industry.
John Lucas
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WE ARE THE NATION...OF DOMINATION!
