The videogame industry's year of precipitous declines was topped off by an unhappy holiday season. In December, game sales fell 26 percent while console sales declined 20 percent.
Despite some record-breaking blockbuster games, consumers just aren't willing to shell out $60 on as many games as they used to.
What happened? People are simply shifting their gaming time—and dollars—to mobile and social gaming. NPD analyst Liam Callahan said physical retail sales "account for roughly 50 percent of the total consumer spend on games." (Read More: 'Game Over' For Videogame Makers?)
When including digital sales—both add-on content and social and mobile games, among other things—NPD estimates the total spending for the month to be over $4.1 billion. That's right in line with spending just on physical games a year ago, not including last year's digital revenue.
The bottom line: New digital revenue is failing to compensate for physical game declines. (Read More: Got Game? Videogame Industry Turns to Mobile.)
But even in this weaker environment the biggest game makers are churning out bigger hits than ever.
The top titles continue to break records—like Activision's "Call of Duty: Black Ops II," which was the biggest game in December and of the year. This is the fourth year that Activision's "Call of Duty" franchise had the top game.
Electronic Arts' "Madden NFL 13" and Microsoft's "Halo 4" rounded out the top three list for the year—those "13" and "4" numbers a reminder of the fact that it's the sequels that succeed: If people are going to shell out $60, they're more likely to trust proven brands.
It's increasingly a hit driven business, with the top ten titles generating a larger share of game sales—12 percentage points more—than a year-ago December.
NPD said one reason the sale of games declined was the fact that there were simply fewer new releases—29 percent fewer new titles across the industry. But the game makers are releasing fewer games because of decreased demand.(Read More: The Most Anticipated Videogames of 2013.)
Console sales were boosted by the introduction of the Wii U. Nintendo sold nearly half a million Wii-U devices in December, and 890,000 since its November launch. The good news for Nintendo: It's generated $300 million in revenue from the console, more than the Wii. The bad news is that increase is only because of the Wii U's higher price. It actually sold fewer units. (Read More: Year-End Wii U Sales Steady, Says Nintendo Chief.)
Microsoft's XBox continues to be the best-selling console, despite the fact that Nintendo introduced a new device. The XBox sold three times the number of Wii U's sold last Month.
The big question is whether the new consoles expected from both Microsoft and Sony this year can revive the industry and draw casual gamers back from much cheaper mobile and social apps.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin