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When you look at the success of Apple I don't think #1 makes any sense ...

 

In my opinion #2 is correct being that if you look at the top selling Wii, Gamecube, PS2, PS3, PSP, Nintendo DS, etc. games in Japan you will see that, while some games seem to have a universal appeal, a lot of what is popular in Japan is drastically different than what is popular elsewhere in the world. With the XBox and XBox 360 Microsoft has done an awful job of producing a reasonable quantity of high quality games that are similar to those games which are typically very popular in Japan, and (as a result) has struggled to find a market.