This is absolute nonsense IMO. PC gaming is huge in Germany for instance. PC is known VERY widely as an FPS haven. Look at the sales of other "killing" games like GTA in Europe. Even the sales of Halo 2 were huge in Europe. Japan might be a different story, but MGS and Devil May Cry were huge there. Not FPS, but certainly a lot of violence. I think the idea that FPS = a lot of violence = poor sales outside the US is ridiculous.
Gaming in Germany is generally not a mainstream activity. The sales figures demonstrate this. PC gaming is a minority exercise, Sims and god-games excluded.
FPS is a specific genre in which violence is enacted through your own eyes. The immersion is greater. The gun culture is big in America, it's not everywhere else. I am 100% positive this is a very big reason for the Xbox's lack of success. The stigma associated with FPS is much greater than in any other type of genre. Games are generally looked down upon as a form of entertainment. Most sales are towards kids. FPS is not a family genre at all. Racing can be a family genre, platforming can be a family genre. FPS will never be a family genre, therefore if your hardware is associated with the FPS stigma then you will never gain mainstream acceptance.
GTA is sandbox. Most people playing the game steal a car and enjoy being chased by the cops. The popularity of GTA was due to the freedom it gave you to do outrageous things. MGS doesn't have to be violent at all, but it's not a big deal in Japan. Neither is DMC4. They make very little impact. They appeal to a small section of the market. Biggest franchises pre-Touch Generations were collection marathons, RPGs, platformers and racers. Halo's success in Europe is still a fraction of its popularity in the US. Is it mainstream in Europe? Not at all. It’s not culturally or socially acceptable.
Microsoft went to Japan with a project called Midway, their primary franchise an FPS, with a console built around Western(read Anglo-Saxon) gaming culture, a focus on online in a market that didn’t want to know, with a marketing theme which used the wrong phrase for High Definition and a console named after its failed predecessor. The results are not surprising.
If you don’t research your market you will fail. Just like SCEI is doing today. One company, actually one man, saw the value of asking consumers what they really desire, it’s no surprise that his company under his vision has eclipsed the rest.
EDIT: The Xenophobia debate....
iPod, Starbucks (Shibuya has the most profitable Starbucks coffee house in the world), McDonalds, Coke, Pepsi, Nike, Adidas, Mercedes, BMW, Ferrari, Porsche, Hollywood movies, American TV shows, Hip-hop culture, etc. etc.
Japan enjoys the same globalised products as the rest of the west. Japan is often included in the characterisation of “Western”.
What is different is their culture.
It’s like asking why NFL isn’t popular outside the US.