|It's only an approximation, but you get the idea.|
Sure, overall the industry is doing well, thanks to digital distribution, mobile, social, virtual items, and all the rest. That doesn't help the companies struggling to transition to the new reality, though. It also bodes poorly for consoles, and new consoles in particular. Part of the decline in sales is due to the fact that publishers aren't putting out as many titles, and until (and unless) new consoles can demonstrate a renewed buying fervor for $60 games, I wouldn't expect to see the number rise. It will continue to shrink.
Some wholesale rethinking of game designs needs to take place. The industry has chased the rabbit called Better Graphics down the rabbit hole for three decades now, and it's still the guiding force for big publishers. Unfortunately it continues to get more expensive to deliver better graphics, and that usually comes at the expense of innovative game mechanics and good, balanced game play. Maybe we should rethink the idea that all customers want is better graphics.
I submit Minecraft as evidence that killer graphics are not a requirement to become a hit. Minecraft's graphics would be considered crude for the late 1980's, and yet the game has made tens of millions. Gee, maybe there's some players out there who care more about game play than graphics. Good luck trying to sell that at a big publisher.
At least with mobile games and downloadable games there are more ways than ever to get a game to market at a low cost, so we're seeing a lot of creativity. I think game players are going to have plenty of good choices ahead of them; game companies (especially big ones dependent on old business models) are going to have a tough time in the next few years.
As for me, I've got a design I've been working on that the world may be ready for...