Thanks to 8th grade English teachers' proclivity for Charles Dickens, "It was the best of times, it was the worst of times" has become a groan-inducing cliche. However, the phrase perfectly sums up the state of the game industry at the start of 2009.

Microsoft's announcement of 5,000 layoffs was one of the first of many grim 2009 headlines.

At virtually the same time NPD was reporting 2008's record game sales of $21 billion, Sega made what would become the first of a steady drumbeat of layoff announcements. Then Microsoft revealed it was eliminating 5,000 positions. Then Electronic Arts increased its previously announced layoffs to 11 percent of its entire staff. Then THQ announced that its payroll would be reduced by 24 percent. Then long-suffering Midway finally declared bankruptcy, setting the stage for its eventual liquidation.

Not all publishers were faring poorly, with Konami posting a profit and Activision reporting record revenues--albeit with a small loss overall. The latter numbers were thanks in no small part to brisk sales of Guitar Hero World Tour, which, unfortunately, would be the last installment (to date) in the series to see runaway success. As the year progressed, the rhythm genre began to wilt, with Guitar Hero: Metallica selling fewer than 900,000 units in the US--compared to World Tour's nearly 5-million-unit domestic haul.

Wii Fit stayed in NPD's top 10…until the month before Wii Fit Plus launched.

One company that also saw its sales decline in 2009 was Nintendo, which had started the year with a bang, thanks to Wii Fit. The Balance Board/minigame pack-in was a fixture on NPD's top 10 list throughout most of the year and was the top game in January and February, when US game sales increased. March saw the first of six straight months of double-digit declines at US retailers, but Nintendo continued to populate game charts with enduring best-sellers like Wii Play, Mario Kart Wii, Mario Kart DS, and New Super Mario Bros. Its Wii console and DS handheld were the top hardware platforms all year, the latter helped by the introduction of the camera-equipped DSi. As of mid-March, the little dual-screen portable had sold more than 100 million units worldwide since its fall 2004 launch.

Nintendo president Satoru Iwata was one of the keynote speakers at March's 2009 Game Developers Conference. There, he announced that the Wii had sold 50 million units and he unveiled the second Zelda game for the DS, Spirit Tracks. Attendees of the San Francisco event were also treated to a presentation by Konami's Hideo Kojima, who chronicled 20 years of Metal Gear games and teased the next installment in the series, Metal Gear Solid Rising. (The game would be revealed at the Electronic Entertainment Expo in June.)

Hideo Kojima teased the Raiden-centered Metal Gear Solid Rising with this GDC 2009 slide.

However, the biggest news at GDC 2009 wasn't made at the event itself. On the Monday preceding the conference, WebTV founder Steve Perlman and former Eidos CEO Mike McGarvey announced OnLive, a new system that aims to combine cloud computing and high-definition gaming. Instead of buying an expensive graphics card, gamers can install a small application on virtually any PC, with all the processing and graphics being done on the company's server farms.

The service, which will charge a monthly subscription and have players buy games at a "competitive" price point, will also be available via a Roku-like box that can be hooked up to any HDTV. (And will, presumably, cost less than a console.) Though such high-profile publishers as Electronic Arts and Ubisoft are backing OnLive, many skeptics wonder how the service will compensate for lag--and whether consumers will purchase games that could disappear if the startup's funding runs out.

Fallout 3 blew the lid off of the Little Big Planet-dominated GDC Awards at the last minute.

The first quarter also saw the year's most prestigious US game award ceremonies, with Little Big Planet winning top honors at the Annual Interactive Achievement Awards during February's DICE Summit. The game also scored many statuettes at GDC's Game Developers Choice Awards, but Fallout 3 snuck in and stole Game of the Year in a surprise upset. The coveted GDCA Pioneer Award was handed out to Alex Rigopulos and Eran Egozy, the founders of Harmonix, the studio behind the original Guitar Hero games and Rock Band.

The three-month period also saw unwelcome headlines on the development front, with Microsoft closing the studio behind the long-running Flight Simulator series. Mythic, the EA-owned studio behind Warhammer Online, saw its staff reduced, as did Volition, the THQ-owned shop behind Saints Row and Red Faction: Guerrilla. Finally, the quarter saw the first reports that Sega had pulled the plug on Obsidian Entertainment's role-playing take on the Aliens films. The cancellation was officially confirmed later in the year, dashing the dreams of sci-fi fans and RPG junkies everywhere.

--Tor Thorsen