Sports Resort for the Nintendo Wii was the top-selling game
Sales of video games and consoles in the US fell to $848.9m (£512.2m) in July, down 29% from $1.19bn in the same month last year.
It was the fifth consecutive monthly decline in the figures from the research group NPD.
Nintendo's Sports Resort game for the Wii console was the month's best-seller with 508,000 copies bought.
The Wii remained the top-selling console, followed by Microsoft's Xbox 360 and Sony's Playstation 3.
About 250,000 Wii consoles were sold, which was roughly half the level from the same month last year.
There is optimism that sales will be boosted in the second half of the year by sales of new titles such as The Beatles: Rock Band, and the latest games in the Halo and Madden football series.
"I think the silver lining is, we're in the trough of the decline," said Michael Pachter, an analyst at Wedbush Morgan.
"The bottom is worse than I thought, but I'm certain we've hit bottom."