Third party sales are currently generally lower than they used to be, but once again, digital is higher than it used to be. It's not a 10% share anymore. 30%, sometimes 40% is not unusual and counting digital only games, most games are digital only, digital sales most likely make up over 50% of all sold software in Japan.

I remember last year there was a digital only party game (forgot it's name) where the publishers expected to sell like 20k copies and it overperformed to such a degree that they are making a sequel and reported it's sales, I think it reached 60k at one point. That's also how in the Media Create Sales threads people were able to determine that Bravely Default II sold at least 60k digitally because it had charted higher.

I just think that the doom and gloom here is a bit of an overreaction.

XI I assume you mean? 

This is also very true. Especially as we don't get direct digital numbers, the official sales charts don't paint the full narrative. 

There are

In 2015 the total of third party software sales (combining all platforms) were north 27 million

In 2021, those numbers are behind 16 million 

Besides that. I don't know for bow long we will be able to keep this narrative JP third parties aren't releasing their games on Switch. The only game that aren't release on Switch are the ones that absolutely can't run on Switch. Games like Resident Evil Village and Monster Hunter World that don't even need to hit big in Japan in first place because their popularity worldwide is enough to offset any decrease in interest on their home market. Indeed those are games that NEED to be popular overseas to become financially profitable

Third parties are releasing their games on Switch. They simply don't sell as much as they used to sell when Playstation platforms were relevant. In past they have to have Nintendo platforms and Playstation platforms to sell, now they only have Nintendo's 

But I agree partially with your point that Sony outright ignoring Japan is the reason behind the overall third party market decline. Just disagree Switch is a path to revive third parties. 

Sony first party output in Japan was pretty irrelevant, so Playstation ecosystem was dedicated to third parties. On Nintendo ecosystem they have competition with Nintendo IPs and of course Nintendo will advertise and prioritize their own software, third parties will have harder time selling on Switch then they used to on Playstation.  

Switch is preventing the JP market to shrink, yes, but their own first party output keeps representing half of boxed sales and I don't see this changing in future 

FFXIV I meant =p.

Hum, that's a fairly good point. A ~35% share in digital sales is not enough to offset a 41% decline from boxed sales (with a 10% share digital) from third parties but at least means the decrease from PS4/Vita/3DS era might be north ~20%, instead of 40%

Rol and Kakadu already said most of what I was going to say, so I'll second them, as well as adding that its hardly Nintendo's fault if third parties and Sony are out of touch with the domestic market.

Appealing to Japan and the West are not mutually exclusive; Nintendo proves its perfectly possible to make games that do both. Sony and a lot of third parties are simply doing a piss poor job of it these days.

Ghost of Tsushima did pretty well in Japan and worldwide.

That one did yes. I meant overall/in general rather than in 100% of cases.

It was only two years ago so it might indicate that Sony have an increased interest in the Japanese market. Wouldn't be suprised if they were working on a sequel to Ghost of Tsushima and maybe new IP's that have a chance at worldwide popularity.