Looking back on 2014, the video game industry can say it succeeded and it failed.
New hardware has flown off store shelves, into more players' hands and at a faster rate than last-generation devices nearly a decade ago.
But. The holiday season, an opportunity for game makers to rebound, proved that not even the biggest companies with the most highly anticipated franchises could entice consumers to spend their money on new titles.
In the month of December, US sales of games on disc continued their decline, falling to $1.28 billion, a drop of 2 percent from the same time a year ago, according to industry watcher the NPD Group. That drop is less than in previous months this year, potentially indicating more stability among game sales. But now there's a new challenge: hardware purchases are slowing down and are no longer a buoy for the industry. Sales of consoles like Sony's PlayStation 4 and Microsoft's Xbox One fell in the same period to $1.31 billion, down 4 percent from December 2013.
Overall for the year, US sales of games on disc plummeted 14 percent, to $5.47 billion, while hardware sales jumped 20 percent, to $5.07 billion. That boost in hardware helped the industry squeeze out a 1 percent total increase in US retail sales. But that kind of increase likely won't repeat. Heading into 2015, the industry will have to contend with continued drops in the amount of money spent on hardware as consumers buy fewer consoles and as prices fall on consoles that do sell.
The problems are twofold. Game console makers like Sony and Microsoft are in a vicious price war, slashing prices and tossing in free games to get as many devices sold as possible. Microsoft, for example, dropped the price of its Xbox One in the US during the holidays, but consumer response was so strong that it chose to reinstate the cut starting January 16.
"Bundles were a major driver of hardware sales this December compared to last," wrote Liam Callahan, an analyst with NPD Group, in a statement. He noted that 71 percent of hardware unit sales came from game consoles with software included, a 121 percent jump from December 2013.
Still, players don't appear to be purchasing enough new software, at least not at full price and at retailers like GameStop or Amazon. Instead, consumers could be choosing to buy used games or heavily discounted titles during online sales.
Over the past year, game executives lamented an unexpectedly steep drop-off in sales of games for older video game consoles. The effects were supposed to have disappeared by now.
The struggles are proving a new obstacle for an industry that still patiently awaits a fuller catalog of new titles it hopes will push software back from the red. This year is full of big bets -- from the latest entry in Microsoft's futuristic war franchise called Halo to Atari's medieval action game The Witcher 3: Wild Hunt.
But Callahan notes that the problems may go deeper than the quality of software. "The console space is going through a period of two transitions," he wrote. The first is a generation transition from older hardware to new, while the industry also undergoes "a format transition as console gamers become more comfortable with downloading games and what is being offered digitally," he added.
Among games sold in December, Activision Blizzard's military shooter Call of Duty: Advanced Warfare was again the top selling title, with Take-Two Interactive Software's updated version of crime thriller Grand Theft Auto V coming in second for the second month in a row. Electronic Arts' Madden NFL 15 football game came in third -- that game had been released in August.
Overall for the year, Call of Duty: Advanced Warfare was the best selling title, with Madden NFL 15 in second and the updated Grand Theft Auto V in third.
As retail sales struggle to find footing, the game industry may look back at 2014 as the turning point when players started spending more of their money on games and other items delivered over the Internet.
In online marketplaces, such as Sony's PlayStation Store, Apple's App Store and Valve's Steam marketplace for PC titles, total spending jumped 11 percent, to $1.2 billion, in the month of December, according to competing industry watcher SuperData Research.
That follows a steady increase month after month, indicating "the difference between digital and retail is now no more than a rounding error," wrote SuperData CEO Joost van Dreunen.