If you have even a minute of time, please enjoy this fantastic segment from TeamCoco, in which Conan O’Brien does videogame reviews in a way a non-videogame person would.

Enjoy this take on Tomb Raider:

But while the gaming hardware was notably absent, consumers did get a glimpse of some key upcoming game titles, as well as Sony’s plans to offer cloud gaming, more integration with PS Vita, and even some concept games that use Sony’s motion-sensor device, the Move.

AllThingsD sat down with Jack Tretton, the president and CEO of Sony Computer Entertainment of America, to discuss the future of the gaming console — as well as why Sony didn’t show theirs last night — and Sony’s strategy of “doubling down” on its hardcore gaming audience.

I think it was Sony’s Andrew House who said right off the bat that the living room is no longer the focal point of gaming. Can you further explain this idea and how it relates to the future of the console?

My interpretation is that the living room used to be the only place that gaming lived. Now it’s the primary place, but it’s not the exclusive place. So I still think that sitting on the couch in front of the TV with a powerful console like PlayStation is the nerve center of the experience, but it doesn’t end there — it extends out into the world, 24 hours a day, seven days a week, on smartphones and tablets and dedicated devices like Vita. It’s a little bit scary if you’re a core gamer, because you feel like if you go to sleep, you might miss something.

A good portion of tonight’s event was on game titles, not as much on cloud streaming, mobile or entertainment. Is Sony PlayStation doubling down on its position with hard-core gamers?

Well, I think the console has evolved beyond strictly gaming devices. People expect multimedia capabilities, and that’s certainly a given. But what we’re all about, in our DNA, is the gaming and the gamers. You buy [PlayStation] because you’re a gamer and you enjoy playing games, and you use it for other purposes, but we’re first and foremost about that core gamer that eats, sleeps and drinks the gaming.

I think there are more gamers today than there have been ever before, and the core is really strong, and loyal.

But at the same time, at least in the U.S. market, Microsoft has had the best-selling console for many months in a row now, and they’ve taken a media-heavy approach. What’s your thought on their strategy?

We look at the market in worldwide terms, and every market is extremely important to us. The facts are, we debuted the PlayStation 3 at $599, which was an extremely steep price barrier for a lot of consumers. And we debuted a year after Microsoft, but on a worldwide basis, we’ve sold the same, if not more, devices. I think we’re at 77 million sold right now — it’s basically splitting hairs. Despite all that, our message has been extremely well-received around the world.

Plus, if you look at multimedia services, we’re the No. 1 streaming device when it comes to Netflix, not Xbox. They’re trying to — I don’t really know what they’re trying to do. I’d rather not comment on their strategy. But we’re trying to say we’re all about the gamers and, by the way, there’s multimedia out there. I think the people who tuned in to see this live streaming event, from all around the world, were watching to see the gaming.

Will the new console cost $599 to start?

I certainly hope not. I think we’re very proud of what we delivered with the PlayStation 3 in terms of technology, and that we were able to enhance the features while still reducing the price to $249. But I think our goal with this is to debut at a more consumer-friendly price. But we haven’t made any final decisions about what the price will be at launch.

Why didn’t we see the new console today?

I guess when I think about the console, you open it up, you look at it, you certainly look at it when you insert a disc, but for most people, it’s behind a cabinet or on a shelf somewhere and you spend all your time looking at the screen. And we wanted to show people the screen. There will be multiple opportunities to share the look of the console between now and the launch. We just didn’t choose this first event as the time to show it.

But is it ready?

I mean, we’re certainly capable of showing playable game content, but we don’t have a mass-production box that we can bring out and pull out. That’s still in development in terms of final specs and design.

It wasn’t a big surprise today that there were some cloud-gaming announcements, given Sony’s acquisition of Gaikai. But cloud gaming, especially when it comes to graphics-heavy stuff, can suffer some technical difficulties. How does Sony plan to manage that?

I think that all credit goes to Gaikai, and all credit goes to Sony for recognizing the strength of Gaikai and acquiring them. We’ve cerainly had cloud storage, but Gaikai seemed to be well ahead of anybody else that we saw, and were doing things we didn’t think were possible. So I think the acquisition allows us to do things that are more in line with consumer expectations; allow them to play the games they expect.

And PS4 can play those games. I’ve certainly seen it done that every game we’ve ever published, up through PS3, is playable with no latency. I don’t know if we’re saying we’re at that stage yet, but we think we can get there in the near term.

There’s no doubt about it’s strength in the U.S., but internationally, it’s not so clear how the seven-year old game console is faring, especially in comparison to Sony’s PlayStation. 

Microsoft sold 281,000 Xbox 360 units in January, up 4.1 percent from 270,000 a year ago, according to the NPD Group, which tracks sales of video-game software, hardware and accessories in the U.S. that occur at retail.

Earlier this week at D: Dive Into Media, Yusuf Mehdi, who leads Microsoft’s interactive entertainment business, also provided an update based on internal data.

He said the overall Xbox installed base is now at 76 million, up from 70 million at the end of September of last year. Also, 24 million Kinects have been sold, up from 20 million last year, and there are 46 million Xbox Live accounts, up from 40 million.

Sales continue to be brisk because the company has been successful at moving beyond a hard-core gaming audience to serve members of the family who like other forms of entertainment, such as streaming video or music.

But the rivalry between the different console makers is particularly intense right now as the industry waits for the next-generation devices to launch.

The Nintendo Wii U was the first to launch this holiday season, but has had a relatively lackluster performance. Next week, Sony is planning to unveil its new home videogame console at an event in New York. But Microsoft has remained mum on its plans for any potential Xbox 720. Earlier this week, Mehdi refused to budge on the subject. “I’ll politely decline any comment,” he said.

So, the question is, will Sony’s PlayStation 4 be well received?

If global trends are any indication, it’s possible. Based on numbers culled from the three company’s earnings reports, Geekwire was able to determine that the PlayStation 3 was the best-selling home console worldwide during the holidays.

Sales of the PS2 and PS3 totaled 6.8 million units for the December quarter to beat the number of Nintendo Wii and Wii U units sold (5.3 million), and the number of units reported by Microsoft for the Xbox 360 (5.9 million).

For the full year, the two PlayStation devices together sold 15.6 million units worldwide, compared with 8 million for Nintendo and about 11 million for the Xbox 360.

In other words, Sony continues to have a very strong worldwide presence for the PlayStation, compared to the Xbox which seems to dominate in the U.S.

Overall, however, the hardware sector remains fairly weak. Most executives in the videogame industry believe a new wave of hardware is needed to spur consumer interest again, while others believe that gamers are less attached to the living room than they were before and prefer gaming wherever they are from their phone or tablet.

NPD reported that sales of hardware in January were down 17 percent year over year when taking into account that the month had five weeks instead of four.

Now, Microsoft is working on enhancing the visual experiences, too.

A Microsoft Research project, called IllumiRoom, was unveiled this week at CES, which uses projectors to overlay images from the TV screen to all of the walls in the room.

Microsoft is clear about calling this a proof of concept, but with a new Xbox on the horizon, it’s fun to think about the kinds of innovations that it could bring to market with new hardware.

Geekwire dug up the video of Eric Rudder, Microsoft’s chief technical strategy officer, who introduced the project onstage during a Samsung press conference.

In a video, animated snowflakes appear on the walls when it is snowing, stars float around the room when traveling through space and the walls ripple to imitate the reverberation or echo of a gunshot in a first-person shooter.

To get it to work, Microsoft is using a Kinect for Windows camera and a projector, so potentially the biggest hurdle to getting this to market will be the price of the equipment. Rudder said the technology could be used to enhance a TV show or movie, a flight simulator or educational experiences.

Here’s a video of IllumiRoom in action. As Microsoft notes, no special effects were added in the production of the video. In other words, this is real, folks.

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The social games maker, which started losing ground earlier last year, had previously earmarked 13 undisclosed games for closure. Last week, TechCrunch identified 11 games which were either already shut down or close to it.

Some of the titles include PetVille, Mafia Wars 2, ForestVille, Vampire Wars and Indiana Jones Adventure World. A Zynga spokeswoman declined to comment, but when you try to visit the games on Facebook, there’s a message redirecting players to check out some of Zynga’s other games, like CastleVille, ChefVille, FarmVille 2, Mafia Wars and YoVille.

There’s a reason why these games eventually must be put to sleep.

The mechanics simply don’t work anymore if a lot of people aren’t playing them — after all, they are social games. If friends aren’t around to tend to your crops or visit your pet when you are away for too long, the games simply break down.

Having a large enough base of players to continue momentum is a problem that extends to other game publishers, too.

For instance, Electronic Arts has a Web page where it lists a running tally of games and services it has either shut down or plans to close. Some Facebook games that have already been cut include World Series Superstars, as of Dec. 31; EA Sports PGA Tour Golf Challenge, on Oct. 25; and others, like Monopoly Millionaires and Age of Immortals.

But as more games become services and are played against other people, instead of computers, other services are being shut down on game consoles, mobile phones and the PC. In January, EA said, it plans to shut down a myriad of services, like FIFA Soccer 11 Ultimate Team for PlayStation 3 and Xbox, and Madden NFL 11 for all three major consoles.

On Zynga’s chopping block, the most popular game is PetVille, which continues to attract a million users every month and 60,000 users daily.

The others are significantly less popular, such as Mafia Wars 2, which has as few as 200,000 monthly and 10,000 daily visitors, according to App Data. Compared to its top-performing titles, like FarmVille 2, which gets 43.5 million monthly and 8.1 million daily users, that’s clearly not very many well-loved pets.

At least two more games are to be discontinued, and that likely doesn’t include other titles that are flagged as underperformers. For instance, Zynga also said that it was no longer investing in The Ville, which performed poorly shortly after the game’s launch in June.

As part of the cost-cutting measures, the San Francisco company also reduced headcount by 5 percent, including some of the developers in Austin who were working on The Ville.

The company’s stock did not respond favorably to the plan, and continues to trade at $2.36 a share, down from a high of nearly $16 over the past year.

Perhaps it’s because investors don’t just want to see how it can cut costs, but how it can generate new streams of revenue. In other words, can Zynga can innovate in new areas that span beyond the ’Ville genre and Facebook? A new hit is what the company has been sorely lacking for the better part of 2012.

By freeing up resources, it at least has a chance.

About halfway through 2012, Zynga started prioritizing new game categories, like mid-core gaming and the casino genre. For instance, in mid-December, it launched Elite Slots on Facebook.

Electronic Arts is also clearly deciding where best to spend its resources, and Facebook is not a favorite. As part of its earnings call in October, it disclosed that the number of people actively playing its games on Facebook dropped by more than half in the past year. Therefore, it was reducing the number of Facebook games it was building this year.

In a blog post, Larry Hryb — a Microsoft spokesperson who blogs under his gamer tag, Major Nelson — reported that the Xbox 360 sold more than 750,000 consoles in the U.S. last week, easily beating Wii U first-week sales of 400,000. What’s more, it exceeds the 700,000 units Nintendo sold of the Wii U and the original Wii combined.

In some ways, however, the two numbers are not really comparable.

The Wii U, which launched last Sunday, costs between $300 and $350, and Microsoft is selling the Xbox for a number of configurations starting at half that price. Additionally, sales of the Wii U were limited by the number of units Nintendo could manufacturer, with many retailers reporting that inventory was sold out.

Microsoft said that the 750,000 consoles it sold between Sunday, Nov. 18 (when the Wii U launched) and Black Friday exceeded its internal forecasts. At that rate, the numbers are absolutely staggering, especially given the amount of pressure that phones and tablets are putting on the TV consoles as alternative gaming devices. Last month, Microsoft sold 270,000 Xbox units, making it the best-selling console in the U.S. at the time.

But access to streaming media and other entertainment is helping to drive sales of the older hardware. As Major Nelson pointed out today, Microsoft’s three-month Xbox Live Gold Subscription sales increased more than 50 percent, compared to the same week last year. On Sunday, its Xbox Live services — which include streaming video and multiplayer game play — were used by more than 14 million people, racking up more than 72 million hours worldwide. Compared to 2011, Microsoft has seen a 43 percent increase in U.S. hours logged on Xbox Live during the week of Black Friday.

I asked Sony for its sales figures for the past week, but the company has not responded to the request.

Much of the toy industry’s success will hinge on how many customers the top toy retailers can lure to their stores with a mix of door-buster deals, exclusive merchandise, price-match guarantees and layaway programs.

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That beats box office releases this year like “Harry Potter and the Deathly Hallows: Part 2” and the “The Avengers” — based on day-one sales in the U.S.

It has been five years since the release of the wildly popular Halo 3 and 11 since the first Halo game exploded on the scene. Microsoft says that, in all, the franchise has now generated more than $3.38 billion, making it “one of the most popular entertainment franchises in the world.” Halo 4, which is sold exclusively on Microsoft’s Xbox, went on sale last week for $60.

Another videogame that can claim blockbuster status is Activision’s Call of Duty franchise. Its latest release, Black Ops II, comes out tomorrow and is shaping up to be “the biggest Call of Duty game ever.” Its last release, Modern Warfare 3, surpassed $1 billion in sales faster than the blockbuster movie “Avatar.” The game, of course, runs across all three of the major consoles, giving it substantially greater reach.

Metacritic, which aggregates videogame reviews from various game publications, gave Microsoft’s Halo an impressively high score of 91 based on 37 reviews. Metacritic has not yet rated the new Call of Duty.

Based on the first 24 hours of sales, Microsoft says Halo 4 is on track to reach $300 million in global sales during week one, making it the biggest Halo launch in history. It also said the game shattered the record for the largest number of players in history, with more than four million players in the first five days. Users spent a total of 31.4 million hours playing Halo 4, pushing the total number of gameplay hours across the franchise past the five billion mark.

On Nov. 18, Nintendo will start selling the Wii U, marking the beginning of the next generation of videogaming hardware. Nintendo has not said how many Wii U’s it expects to sell, but it is forecasting 10 million units combined for both the original Wii and the Wii U this year. Already, retailers have sold out of the limited quantities made available for preorders, but more will be available on launch day.

In an interview with AllThingsD, Nintendo North American President Reggie Fils-Aime said, “We are looking to max out production as quickly as possible.”

Meanwhile, Microsoft said it sold 270,000 Xbox units in the month of October; that’s more than any other console. Based on data from the NPD Group, it says it continues to hold a 56 percent market share of the current generation of consoles in the U.S., including the original Wii U and the Playstation 3.

What’s more, NPD Group said that $315 million was spent on Xbox 360 products in October, or more than the other two current-generation consoles combined.

Nintendo will be the only one of the three to unveil new hardware in time for the holiday shopping season, and has priced the console fairly competitively. The new Wii U will cost between $300 and $350, depending on the package. At the same time, it is dropping the price of the original Wii to $130. The selling points of the new console are a controller with a touchscreen display, 3-D graphics and integration with live TV programming.

In lockstep with Nintendo’s launch, Microsoft has started experimenting with several different pricing models for its hardware, which is now more than six years old. On Oct. 28, it started selling different hardware configurations from $99 to $150 with a two-year Xbox Live commitment of $15 a month. The Live account is required to access many additional features on the console. In contrast, Nintendo does not have a subscription pricing model and only requires the upfront purchase.

And generally it does this without the help of celebrities. But here’s one exception: The videogame’s trailer, which started appearing tonight during Monday Night Football, features cameo appearances from Robert Downey Jr. and French comedian Omar Sy. In the 60-second clip, titled “Surprise,” the actors appear as though they are playing in the game. Of course, the emphasis of Call of Duty is on blowing people to smithereens, but the lines are pretty funny. Downey, for instance, says with Iron-Man-like delivery: “Guess who brought a jet to a gunfight?”

The grenade-packing, bomb-dropping action was directed by Guy Ritchie (a.k.a. Madonna’s ex-husband). Can’t get more mainstream than that, right? That’s exactly what Activision is hoping for, since it wants to deliver another megahit for investors. Call of Duty: Black Ops II costs $60, and will come out Nov. 13. You can watch the entertaining trailer now, for free:

And it’s that kind of online connectivity that is expected to drive the next wave of growth on the consoles.

In a new report, market research firm DFC Intelligence said it believes console sales will regain some momentum in 2014 and 2015 as new systems from Nintendo, Microsoft and Sony hit the market.

As a result, DFC is estimating that by 2017, 39 percent of console game revenue will be via online distribution and online revenue sources.

Nintendo is the first of the hardware makers to announce plans for its next console, which is expected to hit this holiday season. The Wii U will come with features encouraging consumers to connect online, including video chat and Miiverse, a social network where avatars walk around a virtual plaza. With Miiverse, game players will be able to post their thoughts in speech bubbles that appear over their heads with text or drawings — sort of like a status update on Twitter or Facebook.

With existing consoles, players often have the option of downloading new content for games, but typically the original game was purchased on a disk and didn’t require an Internet connection. Sony and Microsoft have not yet announced their plans, but both are expected to eventually release new hardware that will be more connected to the Internet than ever before.

Other companies — like Amazon, Valve’s Steam and Electronic Arts — are also in various stages of offering digital distribution channels.

Despite reports of a soft console market over the past year, DFC is still forecasting the industry to grow over the next five years to $82 billion in 2017 from $67 billion in 2012.

In addition to new consoles fueling some of this growth, the research firm said, the increase is thanks to PC and mobile gaming. Worldwide revenue from online games will reach $35 billion in 2017, up 84 percent from 2011, and PC game revenue is expected to pass $25 billion in 2017, up from about $20 billion in 2012.

Now the videogame maker is gunning for much smaller screens, including smartphones and tablets.

In an interview with All Things D, Activision Blizzard’s VP of Mobile Greg Canessa said to expect several mobile announcements as it invests more heavily in the space.

For starters, the Santa Monica, Calif., company is announcing today that it is creating a publishing arm that will bring third-party mobile games to market. Through the program, it will assist independent game makers with funding, development, distribution and promotion of their titles across both iPhone and iOS.

As part of the deal, developers will get the benefit of publishing their game under the Activision brand, while continuing to own the game’s intellectual property.

The shift to digital has been hard for many game companies to swallow, as it typically means shifting away from selling $60 games at retail to giving away free games that are monetized through advertising and virtual goods.

As part of today’s announcement, Activision said it is partnering with Flurry, a mobile analytics and advertising platform that works closely with thousands of mobile developers to help with this transition. Flurry will provide tools to Activision’s developers to help understand mobile development and distribution, while Activision will lend its expertise in making great videogames.

“Flurry can scout and find those indie developers that we should partner with,” Canessa said.

Flurry President and CEO Simon Khalaf said his company also will be able to help promote Activision’s first- or third-party titles, by cross-promoting the apps in its advertising platform, which reaches more than 250 million consumers a day.

To date, Activision has developed some of its own game titles for mobile, including Crash Bandicoot Nitro Cart 2; Call of Duty: Black Ops Zombies, which is a rendition of the console version of the game; and Skylanders Cloud Patrol. The games cost, respectively, $6.99, $2.99 and 99 cents on the iPhone.

In the future, Canessa said Activision will experiment with releasing games for free, to be monetized through advertising and virtual goods.

There are a number of reasons why Activision decided that now was the right time to invest in mobile, Canessa said, including increased smartphone and tablet penetration and the capability of the devices.

“It made a company like us, that’s focused on mid-core and hardcore gaming, take a second look at the platform,” he said. “Two or three years ago, you couldn’t envision a world where you could put mid- or hardcore games on mobile.”

To date, Activision hasn’t talked about the importance of mobile very much, but it may not really be late to the game, after all.

Last week, Activision’s close competitor Electronic Arts said that a majority of its mobile game titles will become free by the end of the year, representing a shift away from the premium games market. Unlike Activision, Electronic Arts has been one of the largest mobile games developers on both Android and iOS, but it also represents one of the biggest holdouts when it comes to shifting to free.

The game has been so successful it has inspired books, graphic novels and so-called “strategy guides” that have sold more than nine million copies. What’s more, eight of the 10 novels have made the New York Times best seller list.

And now, with the launch of Halo 4 on Nov. 6, the developers of the game are trying their hand at TV.

Well, sort of.

Frank O’Connor, franchise development director at 343 Industries, said this week at E3 that they wanted to create a narrative surrounding the game which would prompt players to talk about it on a regular basis, similar to how co-workers chat about the latest “Game of Thrones” around the water cooler the day after it airs.

He said the game studio asked the question, “How do we create these shared experiences?”

The answer was something they are calling Spartan Ops, which will deliver free “episodic” content on a weekly basis to anyone who buys the regular or limited edition of the game for $60. The episodes are actually not TV shows, but mini-missions that tell a side story to the main Halo game.

It’s different from the main game because players will cooperate with one another rather than compete in order to finish the mission.

In an interview with the The Guardian, O’Connor provided more of an explanation.

“People will typically buy a new game, they’ll talk about the big set-pieces in that game, and then they’ll move on to the multiplayer component, and often just stop talking about it,” he said. “We wanted gamers to have a continual water cooler conversation that revolves around shared gameplay experiences.”

The content won’t be shipped with the DVD, but rather will be delivered weekly through Xbox Live.

During a demonstration on Thursday at the Xbox booth on the floor of the Los Angeles Convention Center, O’Connor said the computer graphics for the first episode aren’t done yet, making the process very similar to a TV show that produces content just in time.

He also said if players don’t get around to playing the content, “they will stack up on your Xbox, like TiVo, and you can play them later.”

O’Connor declined to say how many episodes would be developed in all, but did say that the weekly series will continue on for “months, not weeks.” Each episode will take about 15 minutes for four players to complete — and longer if there are fewer players. In all, he says the weekly episodes will nearly double the amount of game play in Halo 4.

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“We have high aspirations and high hopes for this one,” said Jami Laes, VP of Global Studios for Playfish, EA’s social games studios.

As part of the company’s E3 press conference this afternoon, it is unveiling SimCity Social for Facebook, where players pretend to be the mayor of their very own city.

All Things D began live coverage about an hour ago, but you may be able to catch the tail end of the live stream on Spike TV.

Leave it to a game company to not give up after getting beat the first time it challenged Zynga on the Facebook platform.

As you may recall, last year EA used the annual videogame conference to announce The Sims Social, which it hoped would push the company to the top of the Facebook charts.

For a short period, the game indeed did spectacularly, attracting 30 million players a month soon after launching. At that level, it beat FarmVille, one of Zynga’s most popular games, and helped to make EA the second-largest developer on Facebook.

But a year later, the Sims Social doesn’t even register in the top 25 and EA has fallen to fourth place.

In general, EA believes it can leverage big brands, like the Sims, Monopoly and Scrabble, to catch up to Zynga on the Facebook platform. But so far, Zynga has been able to dominate the charts through established games like FarmVille, CityVille and Poker.

In an interview, EA’s John Riccitiello told All Things D that he wished the Sims Social had sustained longer, but promised that at today’s press conference EA would be making introductions that will make your “eyeballs peel.”

In addition to SimCity, it also will show off several other game announcements for the game consoles and PCs.

To be sure, EA’s SimCity brand is the undisputed leader in city-building simulators, making this launch pivotal to the company’s success.

As with other versions of the game, the Facebook edition challenges players to act as a virtual mayor, constructing roads, buildings and streets from the ground up to make a city. But unlike other versions of the game, players will get to collaborate with friends, deciding to either build a friendly relationship with another city or a rivalry.

For instance, Laes said, a player may go to dinner with a friend and will have the choice to make it a nice evening or to sabotage it by throwing up on the table; likewise, you can send a seagull attack to your friend’s city, unleashing poop bombs on the city’s rooftops.

“It’s suitable for the platform. It’s rewarding and fun and surprising,” said Laes, who was surprisingly stoic discussing such subjects as “poop” and “throw up.”

The social game will launch soon on an unspecified date. It also precedes the launch of the new SimCity for the PC, which is expected to hit stores in February 2013.

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Despite some industry gains from January to February, overall sales totaled $1.06 million last month, down from $1.33 billion year over year; software sales fell 23 percent to $464 million, and hardware sales dropped 18 percent to $381.4 million.

February’s best-selling software title was Call of Duty: Modern Warfare 3, from Activision Blizzard.

While most hardware platforms posted declines year over year, “all current-generation platforms improved sales over January 2012 by more than 50 percent,” NPD said in a note.

A consistent bright spot has been the Microsoft Xbox, which was the best-selling hardware platform for the seventh month in a row. Some 426,000 Xbox units were sold in February, marking the 12th consecutive month Xbox has held more than 40 percent of the current-generation console market share.

And all eyes were on the Sony PlayStation Vita handheld gaming device, which came to market in late February. Only four days of retail sales for the PS Vita were included in this reporting period, but the device gave overall hardware unit sales a month-over-month boost. Not including the PS Vita, hardware unit sales increased by 62 percent over January, NPD said; with PS Vita sales included, the increase was 87 percent.

“More than 1.2 million PS Vita units have been sold globally since launch,” Patrick Seybold, senior director of communications at Sony Computer Entertainment America, said in a statement. “Customer satisfaction rates are very high and momentum will continue as gamers get their hands on a deep lineup of blockbuster titles that take advantage of PS Vita’s unique features, including cross-platform play with the PlayStation 3.”

In January, the videogame industry saw a double-digit decline in physical software sales, as my colleague Tricia Duryee reports, following a number of noteworthy game launches ahead of the holiday season.

Electronic Arts is predicting that the New York Giants will defeat the New England Patriots in the Super Bowl, by a single field goal.

For the past several years, the videogame publisher has been using its hit title Madden NFL to simulate the outcome of the Super Bowl — and in six out of the past eight matchups, it has guessed correctly.

But unlike the camel in the New Jersey zoo that has picked the winner of five of the last six Super Bowls, EA breaks down the score quarter by quarter.

EA simulates the Super Bowl by using artificial intelligence and real data from each team. It even includes variables such as injuries. The simulation is powered by Madden NFL and Xbox 360, the official console sponsor of the NFL.

EA replays the game’s highlights in a video, including Giants quarterback Eli Manning being named MVP for completing 25 of 39 passes with two touchdowns, and the Patriots’ Tom Brady throwing for 327 yards and three touchdowns.

Spoiler Alert: To win the game, Giants kicker Lawrence Tynes will make a 40-yard field goal, with the final score 27-24.

The NPD Group released a new report today that calculated the amount of money Americans are spending on games from the nontraditional market. That includes a lot of digital content, such as subscriptions, digital downloads, social games and mobile games, but also used games and rentals.

In the third quarter, it found that the amount spent on that “other content” totaled $1.64 billion.

While significant, NPD said it wasn’t enough to offset lower revenue from the traditional game market. NPD defines the traditional market as packaged goods sold at retail. In the third quarter, that totaled $1.3 billion.

“New physical retail sales had a rough third quarter,” said Anita Frazier, an analyst with NPD. “Increases in sales from some of these other monetization methods, and full game and add-on digital downloads in particular, only partially offset the decline see in the new physical retail channel.”

She said the overall market, including hardware, totaled $4.2 billion, down 11 percent compared to the same period a year ago.

For companies like Electronic Arts, which is investing heavily in mobile and social games and is placing big bets on online content, like today’s release of Star Wars: The Old Republic, the results of these monthly and quarterly reports are unrepresentative of the trends they are seeing.

“Everything is growing. If you look at the total interactive business, it’s a $50 billion market internationally, and that’s up double digits. That’s where we play,” said EA’s President of Labels Frank Gibeau. “We find it frustrating because it doesn’t tell the whole picture.”

In the second quarter, EA’s digital revenue, which includes downloadable console content, mobile and social — was up 30 percent year over year.

Even a company like Activision, which has been slower to develop games on Facebook and mobile, said that during the second quarter, revenue from digital channels — mostly downloadable content — increased 27 percent year ove year, and accounted for 37 percent of the company’s total net revenue.

For all-digital companies, like Zynga, which went public last week to raise $1 billion, its impact hardly seems to register.

“I think that ultimately we are an interactive entertainment company, not a packaged goods company,” Gibeau said. “We are platform and channel agnostic. The physical channel is a great channel and it’s going to be around longer than people think. … We are fine with that model, but then, when you bring that game home, you should be able to connect to the larger online world.”

“This November marks the best November on record for sales of new physical content,” said NPD Group’s Anita Frazier.

Activision said within the first five days of sales, Call of Duty shattered all previous entertainment records, grossing more than $775 million. In fact, its first month of sales beat the game’s predecessor by about 7 percent, NPD added.

In NPD’s report released today, it analyzed videogame sales for November, taking into account sales made at retail across both hardware and software. It excludes the sale of digital content, like mobile games and downloadable content.

In November, NPD said software sales totaled $1.7 billion, jumping 15 percent from $1.45 billion in the same month last year. Hardware sales weren’t so lucky, falling 9 percent to $982 million from $1.1 billion in November 2010.

The second-most popular title during the month was Bethesda’s Elder Scrolls V: Skyrim for Xbox, PlayStation and the PC. “In one month, Elder Scrolls V: Skyrim is just about half a million units shy of matching Elder Scrolls IV: Oblivion in lifetime sales. Its first month performance was a five-fold increase over Oblivion’s first month sales,” Frazier said.

The rest of the titles in the top 10 are:

• Battlefield 3, Electronic Arts
• Assassin’s Creed: Revelations, Ubisoft
• Just Dance, Ubisoft
• Madden NFL 12, Electronic Arts
• Uncharted 3: Drake’s Deception, Sony
• Saints Row: The Third, THQ
• The Legend of Zelda: SkywardSword, Nintendo
• Batman: Arkham City, Warner Bros. Interactive

But the day — or more accurately, the quarter — has arrived, when consumers spend more on digital games, such as mobile, social and console downloads, than they do on more traditional formats, like console games, according to the NPD Group.

UPDATE: I need to clarify that the category, which includes digital sales, also includes used sales and rentals, so it’s not purely digital sales that are exceeding retail sales, analyst Anita Frazier says. So while digital is absolutely growing, it’s not quite bigger than physical purely on its own.

In the second quarter, NPD estimates that digital revenues totaled $1.74 billion, exceeding the $1.44 billion spent on physical sales. That compares to the first quarter when the split favored physical sales of $2 billion, which topped digital sales of $1.85 billion.

While physical distribution in retail stores and packaged goods may be shifting to digital distribution over broadband connections and wireless airwaves, overall spending seems to be level.

In the second quarter, total videogame sales, including hardware, content and accessories, was estimated at $4.5 billion, which represents an increase of one percent compared to the same period a year earlier.

The NPD Group has not been tracking digital versus retail sales for very long, so it is unclear if this is the first time this has happened, or if the split will be permanent, but generally the trend is that digital revenues are growing while traditional retail sales are falling.

The shift for some incumbent videogame makers has been difficult to stomach.

Many debate the value of shifting from producing a $60 game sold at retail to producing mobile and social games, which frequently rely on a free-to-play model, where users have the option of playing without paying anything.

Others have embraced the concept, believing that the transformation will take place no matter what, or that it will grow the pie of people playing games.

To be sure, the market is just as confused about this period of disruption, leading values to be all over the map.

For example, privately held Zynga, which has filed to raise $1 billion in an IPO, was valued at $14.05 billion in August by a third party, according to a recent filing.

That makes the social games leader more than double the value of publicly held Electronic Arts, which has a market capitalization of $6.8 billion.

Meanwhile, Electronic Arts has been investing heavily in both mobile and social gaming, and, for instance, currently has the second-most popular game on Facebook.

Monthly game sales at brick-and-mortar retail shops have suffered as gamers flocked to both online marketplaces and cheaper games on Web sites such as Facebook and smartphones such as Apple Inc.’s iPhone.

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A report released by the NPD Group found that total game sales from the retail channel, including hardware and software, totaled $1.03 billion, down 10 percent from June 2010.

All three sectors — hardware, software and accessories — recorded as well. Hardware was down nine percent, software was down 12 percent and accessories were down 11 percent.

The decreases were expected, since June can typically be slow as game developers wait to release big hit titles around the holiday period. Additionally, the makeup of the industry is changing.

The physical retail channel still generates the majority of industry sales, but there are a growing number of ways to play games, including mobile apps and downloadable content.

Earlier this week, the NPD Group reported that in the first quarter of the year, digital revenues totaled $1.85 billion.

In June, Take-Two Interactive had three of the top-selling games, including L.A. Noire in first place, Duke Nukem Forever in second and NBA 2K11 in seventh. Sony’s Infamous 2 placed third, and Disney’s LEGO Pirates of the Caribbean ranked fourth.  Nintendo’s Legend of Zelda placed fifth with 283,000 units sold.

The Xbox 360 continues to be the best-selling console, selling more units in the U.S. than any other console for 12 of the past 13 months. In June it sold 507,000 units.

But it was the holiday season that Microsoft was most excited about in a statement issued to the press:

“The size of the Kinect games portfolio will triple by the end of the year and Xbox will bring new partnerships like UFC and Disney to the platform as well as blockbuster games, movies, music and TV together in one place. We expect Xbox 360 to maintain its lead and to be number one worldwide by the end of the year, selling more hardware units than PlayStation and Wii.”

Already, the idea is starting to pay off.

Since then, the company’s game network (plus aspiring social network) called Moshi Monsters has registered 50 million users, mostly between the ages of 6 and 12 years old, and is adding a new player every second. It’s also on pace to generate $100 million in gross retail sales this year.

At E3 last week, I caught up with Mind Candy’s CEO Michael Acton Smith to hear about how he believes he can leverage the company’s social game roots to build a Facebook alternative for kids under the age of 12 and create an entertainment brand worth billions.

Acton Smith’s ambitious plans include bringing the monsters and other characters from the online virtual world into the physical world.

Mind Candy, which is based in London and has offices in New York, plans to officially announce tomorrow the availability of plush stuffed toys and mini-figurines based on the characters from Moshi Monsters. The toys will be sold exclusively at Toys “R” Us online and in stores nationwide starting in July.

The launch of toys in the U.S. follows the popularity of Moshi Monster-branded toys, books, video games, trading cards and a magazine in the UK and Australia, where the game is more popular. Of the 50 million users, only 15 million are in the U.S. today.

Acton Smith’s ambitions are like Harry Potter or SpongeBob SquarePants on steroids.

In addition to toys, he says they are working on music, live tours, a Moshi film and a videogame for the Nintendo DS.

In the game, players choose from one of six virtual pet monsters to name and take care of. They also get to personal and decorate a page and can post notes to a friend’s pinboard, which is a lot like the wall in Facebook. Subscriptions cost $6 a month, but not all users pay.

The company, which has 50 employees, has raised $10 million in venture capital from Index Ventures and Accel Partners.

Here’s a video interview with Acton Smith from the floor of the Los Angeles Convention Center at E3, where his Jimi Hendrix-type attire easily stood out from the rest of the hardcore gamers: