I'm having the biggest case of deja vu. It isn't really worth it to keep discussing though. :-/

But it's exactly the same situation as the chart you linked to me.  PS2 the only player in the market for 18 months until GC release (even though DC was a factor at the time, your chart didn't include it) vs. WiiU the only player in the market for 15 months until PS4 release.

And yet, that trough wasn't anywhere near as severe as the one we saw in 2013 (and that's completely discounting Dreamcast + all 5th gen system sales).

If we examine the more recent generational change, that recovered from a 3 year (rather than 6 year) slump the year both 7th gen consoles released.  Which as you say, isn't a situation we have here as the differing launches mean it wasn't repeated.  But even discounting that, Wii completely took off the year following launch.  Even PS3 had a better second year than WiiU had.  

It might be a little ridiculous to expect a Wii-like success for the market, but that's kinda what we need.  I'm assuming PS4 is going to be another PS3 - ridiculously slow starter that gets there eventually, but takes a long time to do it.  WiiU, however, is looking to do exactly the same (if it even manages to "get there" eventually).  

Like I said, I am expecting mid-generational growth once both consoles get into the swing of things, but I don't see any way that this generation isn't going to be massively, massively down over the last few and even if this is just a freak dip due to lots of unfortunate things aligning; I think it's more an omen of things to come.

Well, they probably do.

Key word in all that: Physical sales.

Very true for software, but you can't download hardware.

Feel free to check the second link in my signature to gauge just how much digital has impacted physical sales, too.

Sure but the drop in hardware is far less than the drop in software.  Meaning the difference is not 1:1 so something else must be a play.

You also have to consider the difference in price given that this is based on revenue rather than units.  As the Japanese industry has transitioned from home consoles to portable consoles, the dominant gaming devices have a lower revenue per unit sold. 

As for Famitsu's digital sales, is that just download cards or is that actual digital software sales?  I'm highly, highly skeptical it's the latter.   That would require admission from devs/pubs of those sales who are not known for being upfront with them at all.

Are you saying that in regards to attach rates; rather than price of software?  Because handheld gaming prices are generally the same as home console in Japan (if not higher).  Looking at attach rates (based on the data we have on VGC), Wii & DS are nearly exactly the same (5.3:1) while PS3 trumps PSP by a fair bit (7:1 vs. 3.9:1), but you have to imagine that even in the land of the UMD, PSP's ability to be hacked had a big impact on software sales.

As regards to Famitsu's digital sales - I have no idea whether they are using a methodology of paying manufacturers, but it's literally the only insight we have into Japanese digital sales.

And apart from that, I'm not sure why we're actually discussing this - I posted a chart showing downwards trends in physical sales and said it was depressing - you pointed out that it was physical sales - and I said that was correct but that wouldn't affect hardware.  

I don't think digital is bridging the gap that would otherwise be there for software - it's a big factor, but I don't think it's a big enough factor to offset decline yet; and as we see more and more publishers transition to mobile it's only going to get worse in the dedicated sector.  If only because there will be fewer games to actually count towards software sales in the first place - which will have a knock on effect to hardware sales, etc.  Or are you saying that this isn't the case and the Japanese industry is in a good place?  In which case, I think it's better we just leave it at disagreement.

I'd question that "effectively flat".  We've got 30m exactly for 6th gen systems in Japan; vs. 24.33m for the 7th gen systems.  Granted, PS3 still has some life left in it at least until the end of 2014 judging by the release schedule; but I question whether it'll be able to make up a ~ 5.5m gap with the other two dead in the water at this point.

I think the analogies you raised as well (PS2 did well out of the gate and well with legs vs. Wii did well out of the gate and terrible with legs; PS3 did terrible out of the gate but good with legs) cover why people - including myself - are worried about the decline in Japan.  Like you've pointed out, a decline can be expected in the gap between generations.  But presumably going into the 7th you had a system that was still selling well (PS2) and a system that was storming out of the door (Wii).  Going into the 8th, we have a system that is still doing... something (PS3) and no systems storming out of the door.  We're basically pinning all hopes of a healthy industry on "well, both of these consoles will have later-in-life-legs".  I don't really know if either of them will to be honest (but if I were to use history to pick one, it'd obviously be PS4).  

And just perhaps, that's why there's more posts looking for doom than there would otherwise be, but I think that's a valid reason to be doing it.  2014 would be the year I'd be looking for major uptick in the Japanese market with both the home consoles with any hope of gaining traction out and one of them having spent 2 holiday seasons in 15 or so months on there.  Right now, we're looking at hopeful minor uptick of Mario Kart does something for the WiiU and PS4 doesn't crater completely in weekly sales; and I wouldn't say that was the sign of a healthy market.

First day sales (sell-through)

{2014.04.03}

[PS4] Natural Doctrine [Limited Edition] (Kadokawa Games) (¥8.618)
[PS4] Natural Doctrine # (Kadokawa Games) (¥7.538)
[PS3] Natural Doctrine (Kadokawa Games) (¥7.538)
[PSV] Natural Doctrine (Kadokawa Games) (¥6.458)

30-40%

[WIU] Just Dance Wii U (Nintendo) (¥6.156) - About 20%