UPDATE 1-Electronic Arts cuts outlook for video game industry

* CEO cuts packaged goods software forecast for sector

* Doesn't expect weakness to continue

SAN FRANCISCO Dec 9 (Reuters) - Video game publisher Electronic Arts Inc ERTS.O now expects a steeper industry-wide decline in packaged software sales in 2009, as the sector closes out a difficult year.

Chief Executive John Riccitiello on Wednesday forecast industry boxed goods sales in the United States and Western Europe combined to fall 11 percent from last year.

The publisher of hits such as "Madden NFL" had previously guided for a fall in mid to high single digits.

Riccitiello said dynamics in the industry are changing with the rise of digital game distribution, but added that he does not expect softness in packaged software sales to continue.

"That packaged goods thing is very big deal. Digital has more than made up for it, but the packaged business has been a real substantial challenge." He spoke at a UBS Media investor conference in New York .

Riccitiello said he expects EA's "Mass Effect 2" game, slated for release next month, to be one of the "biggest games in the industry in 2010."

EA currently publishes more than 50 titles and has said it plans to cut that back to about 40 next fiscal year to focus on quality games.

Shares of Redwood City, California-based Electronic Arts fell 6 cents to $16.30. (Reporting by Gabriel Madway; editing by Gunna Dickson)