According to NPD Group Australia, the video game industry made $1.161 billion in 2012.
That's a 23 per cent contraction compared to the 2011, and excludes digital sales including mobile games, subscriptions, DLC and in-game micro-transactions.
As a result, Australia's Interactive Games and Entertainment Association remains firmly optimistic about the local industry, despite the contraction. iGEA CEO Ron Curry claims that it's becoming increasingly difficult to quantify the "value of the industry" due to digital.
"While there is a decline in traditional sales, the gaming industry as a whole remains buoyant as people shift towards a 'hybrid' model in their consumption of interactive entertainment," Curry said. He also blames the reduction on aging consoles, pointing to a similar pattern in 2005.
The Australian sales contraction mirrors North America, where total video games sales fell 22 per cent in 2012 compared to figures in 2011. The US figure also excludes revenue from digital.
Australian analyst firm Telsyte predicts $730 million worth of digital revenue in 2013.