Japan is notoriously xenophobic, it was stupid of Microsoft to bother dumping that much money into that market when they were going to buy their own product no matter what from the start. That combined with the increasing prominence of handhelds over consoles made them pretty much irrelevant. Then again, they do ok in Europe although not as well as the PS3, and Europe hates America more than anyone.
It's amusing to see the 360 flounder late in the game like this when it is the only console that has been consistently improved with every revision, while Sony removes features near annually and Nintendo is now ending GameCube BC.
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I haven't played The Wind Waker-LinkMarioSamus