U.S. video game sales fell 6 percent overall in June despite strong sales of Microsoft’s slimmer Xbox 360 video game console, according to market researcher NPD Group. This sorry result is sure to get conversations going about how the industry is making a transition to digital online game sales, which aren’t counted in NPD’s retail sales results.

The monthly sales are closely watched because analysts have been wondering about the impact of used game sales and digital distribution of online games on the retail market. And publishers have been quick to lay off employees as the sales figures fail to meet expectations.

Overall game hardware, software, and accessory sales were $1.10 billion in June, down 6 percent from $1.17 billion a year ago. Video game hardware sales rose 5 percent to $401.7 million from $382.8 million a year earlier. Software sales were $531.3 million, down 15 percent from $627 million a year ago. Accessories sales were $169.6 million, up 6 percent from $159.4 million a year ago.

The weaker results are another disappointment. In May, the industry’s collective hardware, software, and accesstory sales fell 5 percent despite the launch of the blockbuster games Take-Two Interactive’s Red Dead Redemption and Nintendo’s Super Mario Galaxy 2.

“Unfortunately, the industry realized a decline versus the same time period last year, driven by decreases in sales of portable hardware and console and portable software,” said Anita Frazier, an analyst at NPD. “A bright spot was sales of console hardware, which increased 35-percent in unit sales over last June, driven by significant increases in Xbox 360 and PS3 sales.”

For the year, overall U.S. sales could come in anywhere from $18 – $21 billion, compared to $20 billion last year.

In a rarity of rarities, Microsoft’s Xbox 360 outsold the Nintendo Wii in June. That was because Microsoft launched the slimmed-down version of the Xbox 360 with a larger 250-gigabyte hard disk drive. Microsoft sold 451,700 consoles in June, while Nintendo sold 422,500 Wiis and Sony sold 304,800 PlayStation 3s.

Microsoft’s console sales number was up 88 percent from a year ago, and the company reports that retailers still say there is strong demand for the new console. Two of the top 10 games of the month were Xbox 360 titles. Overall, Microsoft said that users spent $333 million on Xbox-related goods in June.

Nintendo sold 510,700 DS handhelds, while Sony sold 121,000 PlayStation Portables. For Microsoft, it was the second-largest non-holiday month of hardware sales, next to the September 2007 month when Halo 3 debuted.

Red Dead Redemption took the No. 1 spot for a second month, with 582,900 units sold on the Xbox 360. Red Dead Redemption is now the top-selling game of the year. Super Mario Galaxy sold 548,400 units on the Wii, and Red Dead Redemption took third place for the month, selling 380,300 units on the PS 3. Among new titles launched, Ubisoft’s Just Dance sold 174,900 units on the Wii, taking fifth place. Disney’s Toy Story 3 took 7th place, Warner Bros. Interactive’s LEGO Harry Potter years 1-4 took ninth place.

Nintendo said today that Super Mario Galaxy 2 has sold more than 1.1 million units in the U.S. It also noted that if you add up the DS and Wii sales together, it sold 933,000 units, or 50 percent of all gaming hardware units sold in the month. Life-to-date U.S. sales of the DS are now at 42 million units. Six of the top 10 games in June were Wii or DS titles.

Sony said it has now sold nearly 13 million PS 3 units in the U.S. and that June marked the 11th month of consecutive year-on-year sales growth for PS 3 hardware. PS 3 hardware sales were up 85 percent since a year ago, while PS 3 software sales were up 17 percent from a year ago.

Frazier said that while software sales were down, the top 10 games sold comparably to what they sold in June a year ago. So game sales are more concentrated on the top-selling games, as Square Enix chief executive Yoichi Wada told us in an interview.

Submit your PC game by December 14th for free testing and be entered to win an @intel​ CORE i9 PROCESSOR worth $1000, an iBUYPOWER​ Revolt 2 Pro Z370 worth $1750, or an ASRock​ X299. ENTER & WIN: Submit your PC game to the Intel Game Dev Program