The UK games market declined 17.4 percent in 2012, the Entertainment Retailers Association has revealed.
Games generated £1.598bn in the UK last year, compared to £1.934bn in 2011, the association said. Those numbers are physical and digital sales combined, reports MCV.
Physical formats of music, video and videogames faced another tough year in 2012 with physical music sales (mainly CD) down 14.9%, physical video (DVD and Blu-ray) down 11.4% and videogames (mainly console games) down 26.4%, but physical still retains a dominant share of the entertainment market.
Digital game sales grew 7.7 percent in 2012 to £552.2m, making video games the most valuable - yet slowest growing - digital entertainment sector in the UK.
Ultimately, digital games sales in the UK were still not enough to offset the 26 percent drop in boxed games.
Physical sales accounted for 65.4 percent of the 2012 video games market, down from 73.5 percent the year before. Sales of physical games are now down to £1.05bn.
According to the ERA, physical now accounts for 75.5 percent of the total entertainment market, down from 2011's 80.6 per cent.
Music saw physical sales of 62 percent of its market, while 93.9 percent of video sales are still on DVD or Blu-ray.
Overall, music sales were down just 5.5 per cent in 2012 and video 10 per cent. The overall entertainment market declined by 12 percent, with games the worst performer.
ERA director general Kim Bayley said in a statement: "The combination of a myriad of exciting new devices and compelling new digital retailing services is clearly exciting consumers.
"What is most striking is that these figures do not even include the impact of streaming services like Spotify, Deezer, We7 and Rdio, for whom full market value data is not yet available.
"The dearth of summer releases was clearly a significant factor."
"Despite digital's seemingly inexorable growth, the CD, the DVD and the physical games disc show incredible resilience. It is nearly nine years since iTunes launched in the UK yet over 60 per cent of music sales are still accounted for by physical formats. It is clearly way too soon to write off the CD and in video, digital barely gets a look in. Physical formats still account for three quarters of the entertainment market.
"The dearth of attractive releases during summer 2012 was clearly a significant factor. Suppliers need to do more to rebalance their release schedules and improve the quality of their releases. No retailer can afford to pay overheads on a store for 52 weeks of the year if all the key releases are going to be concentrated in the last quarter.
"And entrepreneurs will think twice about investing in new digital services if releases fail to excite the public. Luckily the message appears to be getting through and we look forward to being able to offer the public a much better release slate in 2013."