Okay, let's look at it this way, $700 million in counted sales plus extrapolated sales of $350 million equals just over $1 billion in PC game sales. While this may represent a drop in sales over the previous year, it still remains that no company is going turn their nose up at a $1 billion PC game market!
Moreover, there are likely very logical reasons for a dip in PC game sales.
Most households have PCs and one or more game console. Those household gaming dollars are spread thinner.
There are many new households with gaming consoles. The Wii has expanded to many, many households that would have never otherwise purchased a game console. These households are buying Wii Fit and such. They are also trying other games for their new Wii. It remains to be seen if these households will continue to support the gaming console market.
I will say this anecdotally, I do think console gamers have much shorter attention spans than do PC gamers. That is, console gamers buy a game, play it for a short while, and are quickly bored with that game and then look for another "thrill me" new game fix. On the other hand, I think PC gamers are much more likely to thoroughly play a game and get involved with it, with WoW being just one example.
The point is, just flashing out some half-baked sales numbers doesn't really tell the whole story.