The sales reports for U.S. videogame hardware rarely change from month to month: Wii on top, Xbox 360 in a distant second, PlayStation 3 in third. In Japan, it's been a totally different story during 2009.

The past two years have seen Nintendo in a definitive first place in its home country, which on a total installed units basis is still rock-solid – one estimate says Nintendo has sold 8 million Wii consoles in Japan versus 3 million PS3s and 1 million Xbox 360s.

This year, however, Wii sales have fallen and PlayStation 3 sales have increased. The main reason why is not difficult to guess: There hasn't been much compelling Wii software this year, while Sony's system has gotten a string of system-selling hits, from Street Fighter to Yakuza 3 to the Final Fantasy XIII demo.

This perfect storm of software – met with little resistance on Nintendo's part, unless you count ports of old GameCube games as "resistance," which you should not – has resulted in Sony selling more units than Nintendo over the past few months. Thus far this year, both have sold about half a million consoles in Japan.

What this really means is that neither of them are doing particularly well, historically speaking. Japan's market for home gaming consoles is smaller than it used to be, and it seems like Nintendo and Sony are scraping to get bigger pieces of a shrinking pie.

In February 2003, while researching a book on Japanese games, I interviewed Dragon Quest creator Yuji Horii. At that time – not long before the Japanese game industry went through a major contraction – he said that games faced a major threat from the growth of the Internet and of cell phones, which he said were more attractive time-killers.

Since then, Japanese leisure time has become increasingly more fractured, personalized, and bite-sized. In introducing Nintendo's Wii no Ma streaming video service this week, Nintendo president Satoru Iwata lamented the collapse of the traditional family-around-the-television: "It has been long since traditional ocha no ma style where family members stay together in front of TV became extinct, as cell phones and the internet brought about rapid changes on people’s ways of life all over the world."

How interesting that an image of a family huddled around a television set, once derided as the decline of traditional family life, is now a romantic idyll. But that's not the point.

Iwata is no traditionalist attempting to maintain a stodgy old company's values in a changing world. For even though his words carry at least a subtle undercurrent of pining for a return to the traditional days when a family played Famicom together, Iwata's company is doing all it can to exploit the new trend of personalization and fragmentation.

Iwata has been very clear on the point: He does not want one Nintendo DS per household, he wants one per person. In his mind, a brother and a sister sharing a DS isn't a charming Norman Rockwell painting, it's a missed sale. Hence the personalizable DSi with its camera, SD card, etc.

And this is why Nintendo DS and Sony's PSP are doing much better in Japan than the home consoles. How much better? To get a sense of what's happened in the Japanese market, look at these graphs by data analyst Bill Harris.

Here, Harris uses "12-month moving averages" to illustrate the sales of game consoles in Japan since their respective launches. Each data point represents the average sales of the console over the previous 12 months of its life. This clearly illustrates the trends while adjusting for the little spikes and dips that occur with big game releases, holiday seasons, etc.

What this graph illustrates first and foremost is just how different the home console situation is, in this generation. The dark blue line represents the PlayStation 2. That's our benchmark for the sort of sales success that first-place consoles have always enjoyed in Japan. Note that Wii, while it started off higher (hence it is historically the "fastest-selling" console), has plummeted since.

The green line is GameCube, a very distant second. PlayStation 3, the sky blue line, was selling more than GameCube for a while, but the streams crossed a little while ago.

All the way down at the bottom, the Xbox 360 is doing significantly better than Xbox, but that's almost literally saying nothing, considering that the original Xbox's sales at this point were already trending asymptotically to zero.

With a lackluster holiday season that saw Wii Music flop and Animal Crossing not make much of an impact, Nintendo's Japan sales are what Harris describes as a "freefall." Hard to argue with that. In the U.S., game releases have traditionally had longer legs. Look at the top 10 sales for January 2009. The ninth, Mario Kart DS, came out in 2005. While Nintendo has had no small amount of success getting Japanese games to sell longer than the customary two weeks, it cannot just coast off of those evergreen releases for as long as it can in the U.S. New software is paramount.

As Nintendo has lost ground, Sony has significantly bettered its position in its home country. We know, barring any delays, that Final Fantasy XIII will be released in Japan in late 2009, meaning that Sony could keep up this momentum throughout the year.

While Nintendo has announced lots of games in Japan for 2009, this list is entirely made up of second-tier titles like Punch-Out!! and Sin and Punishment 2. Besides Wii Sports Resort and the MotionPlus controller, Nintendo has not said what major releases it intends to ship this holiday season in an attempt to give console sales a shot in the arm.

In fact, in announcing Wii no Ma, Iwata went off on a tangent to apologize for the lack of content: "As for our deployment during the latter half of this year, I would like to announce on the other day as it is not today’s main topic. I would like to address that Nintendo recognize that we have been short of new proposals during the former half of this year, so far."

With titles like Monster Hunter 3 (pictured top) coming soon and Dragon Quest X coming much, much later, Wii does have some potential smash hits out on the horizon. But has the damage been done? The possibility remains that nothing can be done about the shift in momentum at this point, and Wii will slip into a month-on-month second place status that it cannot fight its way out of.

Sony has been able to get PSP from a state of abject failure into a more reasonably successful position in the Japanese portable market. It stands to reason that it could do the same for PlayStation 3, especially up against Wii's weaker software lineup. But in the battle for Japan's living room, I wonder if anyone can truly say that they are winning.

Image courtesy Capcom

See Also:- Nintendo's Wii Video Service Offers Quirky Original Content