Retail revenue from video games is declining, and online digital sales face rapid growth.

Pandemic makes games on discs that come shrink-wrapped in plastic boxes and sell for $60 at stores such as Best Buy and Target. Sales for that kind of video game fell 11% last year.

Nexon, however, distributes its video games online free of charge and generates revenue by selling virtual items such as weapons and costumes that players use in the game.

Whether it’s $15-a-month subscriptions to World of Warcraft, $10 downloads on a PlayStation 3, 99-cent iPhone games or ad-supported games on Facebook, digital transactions are growing fast and could be the future of the video game business.

Even as traditional media companies struggle to find profitable business models on the Web — as evidenced by recent moves by Hulu.com and the New York Times to start charging for content — the games industry is experimenting with a variety of methods to generate revenue online.  L A Times

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