The video game industry was seen as something that was recession proof back in 2008. Everybody loves video games and people are going to keep buying them. The Wii was still flying off of shelves and people were gobbling up Xbox 360s and PS3s. Things rarely stay good for so long and 2012 has been tough for the gaming industry. It’s going to keep getting worse if July NPD numbers are any indication.

The NPD released its usual monthly games industry figures today and things are not looking good. In the U.S., consumers spent a collective $1.1 billion on gaming in July. That’s down 20 percent from last year. Furthermore, the NPD reckons that if these sales trends continue, the industry will only make $14.5 billion in sales this year. The industry as a whole made $17 billion last year.

In other discouraging news, console sales were down the most in July. People generally look to console sales for the health of the industry. Consoles drive game and accessory sales which in turn increase games revenue across the board. Unfortunately, July’s console sales only managed to make about $150 million, which is a 32 percent drop from last year.

Software sales were also down in July by 23 percent. They only managed to rake in $261 million. That’s down from the $338 million that software sales made last year. The only big hits in July were NCAA Football 13, which took the number one spot, and Lego Batman 2: DC Super Heroes taking second.

While these sales may seem worrying, gamers and analysts shouldn’t be too concerned. For one, NPD doesn’t cover digital sales or mobile sales. Both markets make a fair amount of money, but they’re not accounted for in official figures. If results from the Steam sale in July were made public and added to NPD numbers, thing might look a little different.

It’s also important to note that we’re at the end of a console lifecycle. Everybody interested in a console has already purchased one. The only thing that can perk up console sales now would be a dramatic price cut. There are still people who hold out on buying consoles even this late into the cycle, but they usually won’t budge until the price hits the magic $150 mark.

The launch of the Wii U may have a positive impact near the end of the year depending on a multitude of factors. The two most important, however, are price and availability. We might see a sales surge if Nintendo is able to market the Wii U as effectively as they did the Wii. In all honesty, we’re probably not going to see a major boost in sales until the next Xbox comes out. Beginning of console cycles and the three years following are always the best for the industry.

Regardless, sales are down now and publishers must figure out a way to reverse the trend. You’re going to see a lot of added value and price cuts going forward into the year. Expect to see the PS3 and Xbox 360 both receive substantial price cuts going into the holiday season. The industry is expecting heavy hitters like Assassin’s Creed III and Black Ops II to perform well. If past sales are any indication, that might just be the case.

[h/t: PC Magazine]