Total sales fell 6% to $1.1 billion, while software dipped 15% to $531.3 million. Hardware sales actually grew 5% to $401.7 million, in part because of the newly redesigned Xbox 360 slim model. Accessories were also up 6% to $169.6 million; this was driven by the Xbox Live 1600 points card, which was the top selling accessory for the fourth month in a row. Year-to-date, the total industry is now down 9% compared to 2009.

Source

Why have sales fallen? Could it be that NPD doesn't seem to be able to track online sales very well, and thus their numbers are becoming unreliable? 

Probably not, given that Pachter didn't mention it to industrygamers.com, who recently interviewed him on this issue.

You would think NPD's numbers might be skewed given that they don't check revenue from subscriptions, downloadable console games (e.g. XBox Live Marketplace), subscription-based MMO's like WoW, or social networking games. 

But Pachter doesn't seem to question the veracity of the data, he instead thinks that the losses are due to gamers spending too much time playing games online.

Huh?

You see, Pachter a game industry analyst and now vidblogger on Gametrailers,  makes this argument to industrygamers.com:

"...we think that the overall decline was due to a very large number of people playing multiplayer online games for free on PlayStation Network, and for an annual fee with unlimited game play on Xbox Live...(all this time playing) has sucked the available time away from what otherwise would be spent playing newly purchased games."

Source

Ah. Ok. I get it.

So, if every game's MP component blew chunks and you only played the twenty-hour long SP game...which, say, had no repeat playability, then that would have made you go out and buy two games a week all year. At that rate, the industry's money problems would be solved.

Pachter seems right on the money, pardon the pun.

But maybe, players just haven't been able to afford new games? Money is tight all over. After all, the economy still blows and your job at the 7-11 barely pays for the rent increase last week. True, your living expenses have gone down since the bank foreclosed on your house and you were forced to rent a six-hundred square foot bachelor pad near the rendering plant, but could you maybe, just maybe, walk (your car was repo'ed last month) over to Best Buy and get a game or two?

Please?

I mean, the game industry is down to only $1.1B/qtr nowadays. I mean...did you know Activision had a decreased presence at E3 this year? Though that concert they put on at the Staple Center with Usher, Rhianna and Eminem was bitchin'. Nevertheless, at this rate, next year's concert they'll only be able to scrape up bands like Devo, Hanson and Men Without Hats. Good gawd.

Ok. Maybe you haven't wanted a new game because there really hasn't been anything worth buying. So, that's why you've been shut in all summer playing CoD4, MW2 or BFBC2 online on your XBox (you pawned your PC for food back in May, remember?).

Well Pachter, who appears to be enjoying his modest little villa in Long Beach in the latest Pach Attack Gametrailer vidcast, understands the industry's dire plight and has suggested that companies like Activision should start charging their online customers. This is completely in lock step with recent rumblings coming from Activision's Bobby Kotick on subscription model gaming.

How do you justify a subscription model on top of the cost of the game?

Well, look at it this way, the $60 bucks you ponied up to buy the game will be like an initiation fee at a swanky private golf and country club. The subscription charge? Well that's like the greens fee. DLC? A good analogy there would be the yearly membership fee.

It'll all add up, but the results will be worth it. Subscription models filter out all the "small people" that cause most of the problems in gaming...shhh: you know, those people are the ones that won't buy anything. The new monetization tactic will leave us with a very well-heeled group of  online gamers. I can guarantee that the cursing in voice chat will go away, though all the guys trading stock tips with those annoying Thurston Howell accents will get stale after a while.

Nevertheless, do the industry a favor and embrace the subscription model.

And for those of you who cannot afford it, please stay quiet and don't grumble too loud please., we're trying to play through. Oh and I'll take the Slushy and a Coke...thanks.