The console market did not fare as well, due in large part to hardware shortages, delays in the release of highly anticipated software titles and consumer anticipation of next-generation hardware

According to The NPD Group, annual 2005 U.S. retail sales of video games, which includes console and portable hardware, software and accessories, saw sales of over $10.5 billion - a six percent increase over the $9.9 billion generated in 2004 and another industry record, exceeding the previous record-breaking $10.3 billion generated in 2002.

Sales set a new record thanks to the strong portable game market, which offset the declines in the console market. For the second year in a row, sales of portable software titles broke the $1 billion mark, generating $1.4 billion in the U.S. Portable game hardware, software and accessory categories saw respective dollar increases of 96 percent, 42 percent and 88 percent over 2004.

The console market did not fare as well, due in large part to hardware shortages, delays in the release of highly anticipated software titles and consumer anticipation of next-generation hardware. For 2005, console hardware, software and accessories saw respective dollar sales declines of three percent, 12 percent and eight percent compared to 2004.

While strong sales of hardware, software and accessories for the Nintendo DS and Sony PSP helped drive another record breaking year for the industry, the backbone of the portable market continues to be Nintendo's GBA. In 2005, GBA software represented 64 percent of total portable software units sold and 52 percent of total portable software dollar sales.

"The introduction of the Xbox 360 was a defining moment for the industry in 2005. However, it goes without saying that the full impact of next generation consoles on the consumer market won't unfold until later this year when Sony and Nintendo's video game consoles hit U.S. retail shelves," said Anita Frazier, industry analyst, The NPD Group. "The real story for 2005 was the incredible expansion of portable gaming. The GBA continued to realize stellar sales, and the introduction of the DS and PSP to the market brought older gamers to the portable format."