PS3's hardest fight is in Japan

[NJ5]

I've been watching Japanese sales attentively for a few months now, and have sometimes asked y-koron some questions about the Japanese market. That has led me to conclude the following:

In my opinion, PS3's hardest fight in the console war is its hometown, Japan. There are several factors which make me say this, the most important of which are:

• the fact that handhelds (the DS, actually) are dominating Japan's videogame sales in a big way. I don't know the exact reasons for this, but it wouldn't surprise me if it's mostly due to the fact that the Japanese society is workaholic in general, which doesn't leave them much time to play games at home. A nice handheld is consequently a great choice to enjoy gaming in their spare time (especially while commuting).
• low hardware sales, which of course is affected by the above reason. This week of sales is especially alarming. Judging by Famitsu's numbers, the PS3 has lost almost all of the momentum it gained from its pre-holiday 4-hit combo (price cut, new model, new colors, Dualshock 3). The holiday drop isn't over yet, so we're likely to see the PS3 stand at a new plateau which is going to be only slightly higher than what it was in 2007.
• the fact that PS3's software attach ratio is very low in Japan, even though the userbase is small (which is typically when the attach ratio should be big, due to early-adopters and hardcore gamers). Software sales are very low, even though the PS3 has gotten some interesting releases which are perfectly tailored to the Japanese market. This leads me to believe that a lot of Japanese people are using their PS3s as Blu-Ray player. The HDTV market is bigger in Japan, and y-koron said that the PS3 is probably the cheapest Blu-Ray player there, especially since the 40 GB model was launched.

It's sometimes easy to think that the PS3's hardest fight is in USA, but I think it's actually doing fine in USA, considering its lower userbase vs the 360. The above factors are true in Japan and Japan only. Both in USA and Europe, significant momentum was gained from the price cuts, and software releases keep contributing to PS3's momentum, while in Japan we have been observing indifference towards PS3's gaming capabilities.

Most importantly, Sony must find a way to avoid the PS3 from going PSP's way in Japan - it's well known that the PSP sells a lot of hardware but little software, also due to multimedia capabilities. Otherwise, the PS3 is likely to continue being a niche product which doesn't really contribute to the gaming division in the form of royalties or garnering 3rd party developer support.