The two-year slide for the gaming industry is still searching for a sandy playground bottom.

On Thursday, market watcher NPD Group posted some grim numbers for March. Video game sales clocked in 4% lower than they did a year earlier, as a 12% spike in hardware and a 13% boost in accessories weren't enough to offset a 16% slide in software.

NPD's data is limited to retail channel checks, so developers may very well be rocking on Web-served content. It's still problematic.

It isn't a surprise to see things hold up well on the gear side. Nintendo's (OTC BB: NTDOY.PK) 3DS debuted last month. Microsoft's (Nasdaq: MSFT) Kinect motion-based sensors and Sony's (NYSE: SNE) PlayStation Move controllers have sold millions apiece since being introduced late last year.

Strength in hardware has historically been a leading indicator for a rebound in software. Folks don't invest $150 on the camera-based Kinect accessory or $250 on a 3DS handheld with 3-D whimsy if they don't plan on buying new games that take advantage of the new features.

It may be different this time. Shares of Activision Blizzard (Nasdaq: ATVI) have been trading in the pre-teens since two summers ago, and Wall Street is braced for lower sales and earnings this year. Electronic Arts (Nasdaq: ERTS) hit a new 52-week high this month, but it's not because of the fundamentals. Analysts see EA's revenue taking a nearly 10% hit for its fiscal year that ended three weeks ago, only making back half of that dip in its new fiscal year.

Any hope for growth in mobile downloads is dashed by both the level playing field and the fact that $0.99 is considered a premium download for smartphone apps. The 3DS is cool, but some of its bigger selling points are the ability to stream Netflix (Nasdaq: NFLX) content and free 3-D movie trailers. In fact, last week's Kinect update for Xbox owners allows for controller-free navigation on Netflix streams. A voice prompt or a hand gesture is all it takes to select a recommended flick or tweak the playback process.

Nintendo, Microsoft, and Sony realize that streaming video and surfing the Internet are major components of their consoles. These features help sell systems, making them the centerpieces of home theaters. Unfortunately, time spent streaming YouTube or checking Facebook feeds means less time spent on gaming itself.

There's a troublesome divergence taking place. Hardware sales aren't resulting in the desired surge in software. The industry has transformed gamers into couch potatoes, and it may be too late to turn back now.

Do you think the traditional video game industry will bounce back? Share your thoughts in the comment box below.

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Longtime Fool contributor Rick Munarriz wonders where the diehard gamers went. Rick does not own shares in any of the companies in this story, except for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it could beat Jordan in Expert mode if it had to.