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First CDs, then DVDs -now even video game makers are inconsolable

Sales of video games collapsed last year thanks to weak releases by the big names, a decline in shop space and gamers' boredom with the existing generation of consoles, an industry body revealed yesterday.

In its annual update, the Entertainment Retailers Association revealed that digital downloads of music, video and video games rose 11 per cent in 2012, pushing UK sales past £1bn for the first time.

However, the milestone could not mask the tough time endured by the British entertainment industry, as a result of a larger fall in the market for physical CDs, DVDs and games, which still account for three-quarters of all sales. Total sales of music, video and video games fell 12 per cent to £4.21bn.

The music industry was hit hard by another slump in sales of album CDs, which were down by 19 per cent. But the most surprising figure was the sharp decline in the consumption of video games, one of the UK's strongest and most valuable creative industries, and a big exporter. The market for all electronic games, including special forces "shoot'em ups" and more gentle puzzles, tumbled by 17 per cent from £1.93bn to £1.59bn.

The fall was much steeper than in previous years, when sales dropped from £2.04bn in 2009 to £1.93bn in 2011 with the slow migration to lower-value digital gaming.

The Entertainment Retailers Association partly blamed the Olympics for putting video games producers off releasing blockbusters last summer. Kim Bayley, its chief executive, said: "The dearth of attractive releases during summer 2012 was clearly a significant factor."

Another factor was "the end of the console cycle", she said, with years having passed since Microsoft launched its XBox 360 in 2005 and Sony its Playstation 3 in 2006.

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In addition, shelf space for video games had shrunk after the collapse of Game Group, which went into administration in March, when 277 Game and Gamestation shops were closed (a further 300 stores were re-opened under new owners).

The best-selling games last year were new versions of old franchises such as Call of Duty's BlackOps 2 and Fifa 2013.

Calling for the industry to spice up its products and establish a more reliable conveyer belt of hits, Ms Bayley said: "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."

She added that the boredom message "appears to be getting through" to the industry and was "optimistic" about this year, when new releases will include Sniper: Ghost Warrior 2, Dead Space 3, Crysis 3, and new versions of the Tomb Raider and SimCity titles.

Sales of physical video games fell by 26 per cent and CD album sales by 11 per cent, according to figures for 2012 released yesterday by the music industry body, the BPI. These results showed that a continuing rise in digital downloads of singles, which rose 4.7 per cent in 2012, could not offset the falls in the much larger market for CDs (which still remain popular with customers, accounting for 69 per cent of album sales). The falls have heaped trouble at the door of the struggling retailer HMV, whose shares fell a further 10 per cent yesterday.

A bright spot was the success of British acts, who - in the form of Emili Sande, Adele and Ed Sheeran - accounted for the top three best-selling albums in the UK.

Tony Wadsworth, the BPI's chairman, said: "British artists continue to resonate strongly with music fans in their home territoryâ?¦ The domestic success of albums from Mumford & Sons and One Direction has been replicated abroad: both British acts have achieved massive success in the US."

The highest-selling album of the year was Emili Sandé's Our Version of Events and the best-selling single "Somebody That I Used To Know" by the Australian pop musician Gotye, according to figures from the Official Chart Company released by the BPI.