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RolStoppable said:
Four of the top 10 titles in 2012 came from Japan. That's not too shabby.

But let's not forget that Nintendo doesn't count. Where Inafune is right is that the majority of Japanese developers isn't interested in selling games outside of Japan. Japanese game design and mechanics aren't bad, but Japanese art design is. Or rather than bad, it's simply unattractive. Anime has no mass appeal in the West, but way too many Japanese games try to look like anime. As soon as that holds true, the game has no chance to get beyond niche status in the Western markets.

Anime (or Manga) might not be going through its best moment right now in the West for a variety of reasons, but to say it has no mass appeal seems a bit of an exaggeration to me. There's still millions of people outside Japan that regularly follow it and love their various visual styles, not to mention those that have previously enjoyed them and could be attracted again with the right move. I don't think this is the issue, at least in general.

One of the things that many people don't seem to take into account regarding the sales of Japanese products is the various obstacles that they have to overcome to even begin to offer their products outside their country. The language and other cultural barriers, the distribution issues, the price issues, etc. And the way these issues impact the final product sold in the West, like the evaluation of their writing and voices, the occasional censorship, the budget for advertising, and so on. All this before we even begin to evaluate the product in question.

On the other hand, it's obviously easier for cultural products from the US and many European countries to sell in their own markets, and after that dealing with a world where English is the most spoken language and their cultural elements have been spreading for a much longer time. They have the distribution chain in place and an audience familiar with their troopes. This is the reason why I can turn the TV in my Latin American country and have a wide offer of popular movies and series from the US and a few European countries, many of them in both subbed and dubbed forms, while I can't even get to watch Naruto's latest episodes, specially in its original language. And while the internet has been making strides into making mainstream media more open and on demand, it still has to catch up in accesibility and popularity.

It gets even more ridiculous when people compare them to all Western countries combined as it's the case with gaming here... What if we were to compare them with the US alone instead ? And how much of the sales of US games come from the US alone, which happens to have roughly 3 times the population that Japan has ? When you take all these elements into account, the fact that Japanese games and Anime are as popular as they are is much more impressive. And maybe being "niche" in general with a few mainstream hits here and there is the most you can accomplish in this situation.

Of course, I can understand your point about Nintendo's universal appeal and I agree that you don't have to cater to a specific, particular taste. But I don't think this is something that Nintendo "forced" for the most part, but rather something they believed in, nor do I think that it's something that should always be pursued. The idea of designing things "by committee" and appeal to all demographics (or the biggest one) many times ends up in failure, not to mention how it can get in the way of originality and innovation. And when you start restricting or removing elements of your work with the idea of appealing to more people, it's easy to end up taking away that distinctive charm that made it interesting in the first place.

PS: I apologize for the wall of text...