Console video game sales aren’t getting the love they once did from consumers. Activision Blizzard shocked the game industry yesterday when it said it was laying off 500 people and shuttering the Guitar Hero video game franchise.

But consumers are spending more money on video games — more than quarter of the dollars they spend on entertainment — than they do on any other medium now. And video games as a whole are going to grow in 2011, according to game analyst Anita Frazier (pictured below) at market researcher NPD Group. She says that the proliferation of new platforms, digital content, and an influx of new users who have never played before will generate growth in both numbers and revenues this year.

Frazier said the reasons why games will grow in 2011 are:

1. The economy is improving. That will lead to increased consumer spending, as began to happen during the holiday shopping season in 2010.

2. The mobile markets for smartphones and tablets are growing dramatically.

3. The digital distribution of games through downloadable content, social networks, and web sites is on the rise. About 17 percent of the U.S. population and 33 percent of hardcore gamers now play games on social networks.

4. Broadband penetration continues to grow, enabling digital impulse buys. The hassle of downloading is starting to disappear, as it now takes less time for people with good broadband connections to download a game. About 71 percent of the U.S. population has high-speed internet.

5. Motion control adoption, through Microsoft’s Kinect and Sony’s Move peripherals, is driving new game sales. Microsoft’s Kinect (pictured in use above) sold 8 million units in its first couple of months, making it the biggest-selling consumer electronics launch in history.

6. Stereoscopic 3D gaming arrives with Nintendo’s 3DS. Nintendo’s new handheld system arrives with glasses-free 3D in March.

7. The spend on games is expanding through other avenues such as advergaming and promotional referrals or offers. This enables people without cash to spend on games to enjoy them and still generate revenues for publishers.

Frazier said that consumer expectations have changed, with more people focused on instant gratification. That means they want their games on demand, as soon as they can download them.

About 59 percent of the U.S. population now plays games, compared to about 70 percent that read a book, 86 percent that watch movies and 93 percent who listen to music. Frazier said that people have an average of 62 hours of free time a week. People 13 and up spend 17 hours watching movies or TV, 11 hours listening to music, and five hours playing video games. The total time spent on playing games is up 20 million hours.

About 51 percent of players play games on the latest consoles. About 36 percent play on social networks. Some 24 percent play on mobile phones, and 21 percent play on portable game devices. About 38 percent of hardcore console gamers play games on social networks.

On a monthly basis, games account for 27 percent of the amount of money spent on entertainment, while movies account for 22 percent (since the average price of a game is a lot more than the average price for a movie).

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