Packaged? Yes. Sales of packaged software are likely to continue to decline.
Packaged + Digital + DLC? No. Overall spending on software, including Digital Distribution and DLC has not declined. Between 15-25% of Day 1 sales on core titles are coming digitally now, however, which could get to 25-35% by end 2015. Over a product's life 15-20% of sales will come digitally right now. By end 2015 that maybe gets to 20-25%?? Combine that with what looks to be a packed 2015, can see a path to double digit % growth in software spend in 2015. Look for more offers digitally that include the base game with a season pass at some kind of combined discount (-10% or -15%) with a digital pre-order. This will be the trend of 2015.
Honestly, I'm not as bullish as you are. Maybe next generation, but while retail is declining and digital is increasing, I don't see that reaching a point this generation where digital actually allows the 'overall ceiling' of game sales to actually rise. Which wouldn't net out a sales growth (meaning, the rise in digital won't fully offset the the decline of retail).
There's just too many barriers still.
Bad bandwith access, lack of harddrive space, utterly terrible digital merchandising (it's much easier to walk into a store and find content on a shelf, or to hvae a GameStop rep recommend titles to you to pick up) than digital storefronts offer right now. There's less "window shopping" - current behavior tends to have people logging into storefronts when they know a game is out they want, buying that, and not really browsing. You get less product per basket that way.
Plus, digital is tough to gift.
And you can make the argument that 'core users' will simply buy more because they are the ones with the knowledge on how to do that and the equipment and desire and income to purchase more to make up for it... but the downside of that is pricing, because they want it all but are increasingly reluctant to pay full price for it. Just look at Steam for that; yes that audience is buying more than ever, particularly on digital, but that's mostly driven by massive price promotion. And how sustainable is that right now? Especially when the demand for that audience is things like 1080p/60fps, which isn't reasonable in all instances, not all genres, tools, and studious are created the same, but it costs
more money to build games like that, but you're only willing to
pay less for your games (since you buy so many, and various other reasons). So there's a lot of re-balancing to do here over this generation.
Re gifting: that's why holidays do so well at retail over digital, parents and friends go in to stores and buy for their kids, or buy one for themselves and one for friends. Digital isn't going to make up for any loss, if there aren't 'big games at retail' enough to drive those shoppers to stores. It's immensely important that 'big, AAA games' continue to exist and do well, the industry needs those tentpole 'event' games to get people to go into the store and pick up hardware and accessories and it needs retail representatives to up-sell people on other games as well, to spread awareness.
This gen is in a difficult position, because hardware is killing it but software last gen was doing so much better, people are just buying fewer games which still affects companies bottom line.
I suspect a lot more subscription services, microtransactions and whatnot if digital continues to grow because that revenue has to come from some where. It's not just about selling box software anymore. Or you'll see companies getting smaller as they focus on what is profitable.
I think we need a full revolution in how we actually are merchandised, access, purchase, and play digital games because I don't think the current storefronts are going to cut it long term.
edit:
That isn't written too well, lot's of rambling, but whatever, you get the idea!
