The video-game industry saw sales at U.S. retailers in May hit its lowest mark in nearly two years, as every category declined with the exception of portable hardware sales, a market research firm said Friday.

Overall sales last month dipped below $1 billion for the first time since August 2007, the NPD Group said. It was the third consecutive month of year-to-year declining sales.

"Unit sales declined less than dollar sales did," NPD analyst Anita Frazier said in an e-mail. "The dollar sales decline was exacerbated by a decline in average retail prices for almost all of the categories."

Sales of video games, consoles, software, and accessories reached $864.2 million in May, compared with $1.1 billion a year ago. The biggest decline was in hardware sales, which fell 30% from a year ago. Console sales include the Microsoft Xbox 360, Nintendo Wii, and Sony PlayStation 3.

Video games, the largest category in terms of dollar sales, fell 23%. "While there were some very strong new releases this month along with continued strong sales of evergreen games, this month's top 10 games sold 2.6 million units combined, whereas last year the top 10 sold 3.7 million units," Frazier said.

The exception in hardware sales was in portables, which was bolstered by the continued strong sales of the Nintendo DS product line, particularly the DSi and Lite. The DSi, the latest iteration of the popular DS handheld, was released in March.

"The DS was the top-selling hardware platform for the month," Frazier said. "There is a lot of new DS content coming to market this month for a wide variety of gamers, so we should see strong hardware sales continue."

Looking ahead, NPD said June sales could be better because of some promising video games being released, such as Prototype, Red Faction, Virtua Tennis, Ghostbusters, Transformers, and Tiger Woods. Sims 3, a PC game, is also expected to do well. Games are a major driver behind new hardware sales

"The wide variety of new content could help reinvigorate things somewhat," Frazier said.

NPD monitors dollar and unit sales at U.S. retailers, excluding Web sales.

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