Sony and Microsoft are expected to launch new PlayStations and Xboxes next year. The consoles are connected to the games — major publishers are holding out many new games for the next-generation boxes. In the meantime Microsoft boasted that its Xbox 360 has been the top selling console in the U.S. for 21 months.
Console games dropped 18 percent, despite some big hits. Electronic Arts came out the big winner — not only was its "Madden NFL 13" the top-selling game, selling 11 percent more units than last year, but EA snagged five of the top ten new game spots. Take-Two Interactive also fared well: Its "Borderlands 2" was the second best-selling game for the month. (Read More: The Most Anticipated Videogames of 2013 .)
PC games fared even better — strong launches like Activision 's "World of Warcraft: Mists of Pandaria" helped soften total game declines. Including PC sales, games declined just 14 percent.
But the big story is the meteoric rise of digital, which includes social games, mobile apps, and digital downloads. NPD reported that digital totaled $488 million last month. That's 89 percent as much as was spent on packaged goods.
However, the rise of digital isn't necessarily good for social and mobile gaming company Zynga . On Thursday NPD reported that while people are playing a lot more mobile games, they're not necessarily paying to play. (Read More: Bad News for Videogame Industry: Players Going Mobile .)
The fourth quarter is the most important for videogame makers. We'll see whether a slew of big game launches — like EA's "Medal of Honor: Warfight" and Activison's "Call of Duty: Black Ops 2" — re-ignite sales.
There is one small piece of positive news, and it is a small one: NPD said it sees indication of momentum heading into the holiday season based on the fact that "Hardware sales are up on average sales per week basis compared to August for the NDS, 3DS, PS3, Vita, and 360."
BMO analyst Edward Williams wrote in a note Friday: "We expect retail software trends to improve in the balance of the year."
—By CNBC's Julia Boorstin
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