According to new data released by NPD, video game sales are on a steady decline. Sales of software, hardware, and gaming peripherals fell 31 percent, down to $1.17 billion in June 2009. The month prior saw sales around the $1.7 billion mark. According to NPD analyst Anita Frazier, “this month saw the greatest year-over-year monthly decline since September 2000, when the industry declined 41 percent.” Overall, 2008 has seen sales of video games and their associated counterparts (hardware and joysticks, etc.) are down 12 percent YOY.

And it’s not just the plastic wrapped shiny discs that aren’t moving off retailers’ shelves. Console sales revenues took a 38 percent hit, totaling only $382.6 million. Of the big three, Microsoft’s Xbox was the only console that actually increased sales during the month of June. Nintendo’s Wii saw a drop of 45 percent, and Sony’s (arguably overpriced) PS3 got clobbered with a 59 percent drop in sales.

And while a 45 percent drop in Wii sales might look bad on paper, Nintendo’s mobile gaming devices, the DS and DSi pulled down 766,000 sales receipts, larger sales numbers than all three consoles combined. If that wasn’t enough to cover the electric bill, Nintendo’s Wii Motion Plus accessory (an add on that makes the controller more accurate) clocked in with 374,000 units sold.

But hang on a second…haven’t we just heard that gaming is seeing a tremendous rise, partially contributed to the current economic situation? Just last week, comScore put out numbers indicating that the market had grown 22 percent in 2009, so what gives?

“Our latest gamer segmentation study suggests that more than 4m new ‘players’ have entered the games market since last year, so certainly the decline isn’t due to less folks participating in the industry,” NPD’s Anita Frazier explained.

“Some of these are new retail consumers and some are playing online for free, and others are a mix of both. The trick is to continue to figure out how to monetize all the gaming that is going on across PC, mobile devices, and video game systems.

“Certainly there is plenty of opportunity in the industry, but the rate of change in many areas of the industry presents a lot of challenge as well.”

So if the segment has seen a spike in usership, but yet, sales are slumping, where are all these people going? And better yet…where, on what, and if at all, are they spending their money?

“While some of the decline in retail sales could be a migration on the part of consumers to acquiring content via digital distribution, our reports on downloads and subscriptions reveal that it’s not yet having enough impact on the console market to be an overly meaningful factor in the retail down-turn. That said, there are increasing avenues for consumers to game, including via mobile devices, and it’s clear the industry is sorting through how to manage all these opportunities while deploying resources appropriately,” says Frazier.

Now I’m not one to pick at words (yes I am), but note that Frazier mentions only downloads and subscriptions. There are two key pieces of data that NPD is not addressing here. Browser based gaming, and in platform gaming (i.e. casual games apps on social networks). While NPD may be clocking downloads and subscriptions, there’s no indication that they’ve collected significant data on where these 4 million new gamers are going. They’re clearly not heading to the local Best Buy to drop $59.99 on the newest copy of Call of Duty, so again…where are they? My bet firmly lies in browser based, either within social networks, or directly, gaming. If that be the case, the even more important question is – how many of these new gamers, all playing for free, are or plan to make a microtransaction purchase?