Retail video game sales incurred a staggering year-over-year decline of 26 percent in July 2011, marking the biggest slump since October 2006, according to research firm NPD. Chief to blame was a 29 percent dip in sales across the hardware channel.

Even the Xbox 360, which has been enjoying brisk sales as of late, shifted only 277,000 units in July – a 37.5 percent drop. Despite this, the 360 still remained on top for the month, accounting for 45 percent of PS3 and Wii sales combined.

Software sales took a hefty hit as well, representing a 17 percent year-over-year decline. While 19 titles broke 100K units last July, only 8 titles topped the 100K mark this year.

Of course, these figures don’t paint the whole picture. Interest in digital distribution is on the rise, less gamers are buying through retail, at least on the PC side.

Hardware

Xbox 360 – 227K
Wii – 190K
PS3 – 148k (estimated)

Top 10 Games (New Physical Retail only; across all platforms incl. PC) Rank Publisher

NCAA Football 12 (360, PS3) 1 Electronic Arts
Cars 2 (NDS, Wii, 360, PS3, PC) 2 Disney Interactive Studios
Call of Duty: Black Ops (360, PS3, NDS, Wii, PC) 3 Activision Blizzard
Lego Pirates of the Caribbean: The Video Game (Wii, NDS, 360, PS3, 3DS, PSP, PC) 4 Disney Interactive Studios
Just Dance 2 (Wii) 5 Ubisoft
Major League Baseball 2K11 (360, Wii, NDS, PS3, PS2, PSP, PC) 6 Take 2 Interactive
Zumba Fitness: Join the Party (Wii, 360, PS3) 7 Majesco
Fallout: New Vegas (360, PS3, PC) 8 Bethesda Softworks
New Super Mario Bros DS (NDS) 9 Nintendo
Mortal Kombat 2011 (360, PS3) 10 Warner Bros. Interactive

Follow this author on Twitter.