I've a somewhat complimentary hypothesis from watching NPD data over the last few years which I wish I had the proper access to test. My conjecture is that that the “hardcore” market hasn't just stopped growing, it has been more or less static this console generation and possibly longer.

If you factor out the growth driven by the Wii (i.e. assert that the Wii turned out to be a reprise of the Gamecube sales wise) then the record revenue increases that were crowed about, peaking in 2008 don't look so clever. Consider also, who makes the majority of the money on the Wii (Nintendo!) and you start to build up a picture. Sony and Microsoft's revenues aren't a long way from flat over this time.

US revenues were around $10bn in 2005 and have been around $20bn the last two years. The same last two years Nintendo's market share has been around 50%. What was Nintendo's marketshare in 2005? I don't have access to that data but it sure as hell wasn't 50%.

Over-simplistic perhaps but analysts continue to talk about the decline in the US market being down to Nintendo without considering how revenue's hit these highs in the first place.

A few thoughts here… You say “In short, we’re seeing fewer titles take a larger share of the revenue.” I'm not sure this is entirely the correct analysis here, although you're certainly gesturing in the right direction.

The revenue distribution in videogames hasn't obviously narrowed in the last 10 years as far as I can tell – we're still seeing about 5% of the games take 50% of the revenue. What we have seen is fewer titles competing in the same space, probably because the cost of development has risen so the number of titles (for the power consoles at least) has declined. Now weirdly this suggests that *more* titles are pulling in the big numbers, since the rough percentages haven't shifted much. But it's still the same small slice of the wedge getting those good numbers, we're maybe talking about 3-4 strong hits per year rather than 1-2. Also, the rate of incidence of mega-hits has increased – Modern Warfare 2 being the example of this kind of title. More on this in a moment.

What does appear to have happened is the middle market has died up. It used to be that there was a lively A market below the AAA's – now it's difficult to find any evidence of this space. The drying up of the once plentiful license tie-in titles speaks of this problem. The reason for the loss of this market probably matches your analysis here – but it's been a big hit for both developers and retailers, both of which rely on a solid throughput of titles.

In the 90's, 8 million was the ceiling for core market games, now this seems to have risen to about 12 million (give or take) and my unprovable suspicion is that this reflects a rise in the numbers of people in the core market. If so, the hardcore market isn't declining or static, it is continuing to grow, as can be seen from the relative sales of titles targeting a purely core market (at least, the big ones that get the marketing spend) which can now sell 3 million whereas in the 80s they topped out at a million. But the rate of growth of this market is considerably slower than the rate of growth of the mass market, and anyway, because of the rising cost of development of AAA console titles it's become harder and harder to make good returns targeting this market at the top end. It seems that a lot of indie developers are able to fill the huge gaps in the diversity of the market by providing niche hardcore titles at the bottom end, but the economics of this is harder to track of course.

So on the whole I suspect nothing much has changed at the top, and it's rather the middle of the core market which has been stripped away… with disastrous effects for both developers and small retailers.

As for boxed product, the AAA games continue to require boxed product – the development budgets demand the higher RRPs which can only be acquired in a box product because of consumer psychology; people are willing to pay more to get a physical item (no matter how illogical this may be!). The fall off in boxed products in the actual data in Nick Parker's chart probably reflects the fewer titles being fielded *and* the narrowing of the target market of those titles. His extrapolations look excessive to me although I don't doubt that you are correct to think that a greater and greater proportion of revenue will be obtained via downloads going forward.

Unlike you, I don't see an end to boxed product any time soon, but without the diversity of titles that there was, say, during the PlayStation era, the indie retailers can't make up the numbers, and the ability for supermarkets to undercut only makes their position even more tenuous. CHIPs, alas, have fallen prey to these changes in the shape of the market for videogames.

All the best!