While sales of video games in physical stores is declining, the amount spent online on digital goods for games is skyrocketing.

Market researcher NPD said today that gamers spent $2.6 billion to $2.9 billion on digital online goods, such as downloadable games on the consoles and social network games on the PC. The new data should ease fears that the video-game business is declining as a whole, while supporting the notion that games are becoming even stronger as an industry by transitioning to broader business platforms beyond the old boxes-in-stores model.

Gamers still spent $3.7 billion on console and PC games purchased in physical stores in the first half of 2010.

The digital goods figure includes revenue from used games (which are often bought online, but can also be bought in stores), game rentals, subscriptions, full game digital downloads, social network games, downloadable content, and mobile game apps. In other words, NPD is including its best estimates on the full bucket of the game industry, including its fast growing parts such as Facebook and iPhone games.

Dollars spent on physical retail items such as hardware, software and accessories still accounts for the majority of the total consumer spend. But when you factor in digital content, the total consumer spend is 40 percent larger than new physical retail sales alone.

“Our expanded research coverage allows us to assess the total consumer spend  across the growing number of ways to acquire and experience gaming, including social networks,” said Anita Frazier, analyst at NPD.

NPD does its research through point- of-sale and consumer research tracking.

[photo credit: lolcatpics.com]