What an all-digital PlayStation means for the games industry

The search for more profit from a dwindling consumer base

When Sony announced it would cease making physical PlayStation games in 2028, it seemed like the end of an era. It isn't. Polygon spoke with Circana senior director and video game industry advisor Mat Piscatella over email about the timing of Sony's decision and what prompted the company to focus so heavily on digital media. And a more accurate framing of the development is that it continues trends that have shaped the games industry for nearly a decade now, pushing Sony, Microsoft, and Nintendo further into their respective niches for better or worse.

Sony timed its announcement to fall right before Microsoft made its well-advertised layoff announcements across the Xbox division. Perhaps that was intentional. But Piscatella pointed out the timing's practical side as well. Announcing it now gives Sony's partners 18 months to start winding down their operations. Sony itself wasted no time. The last factory that handled PlayStation disc orders is already being repurposed, with all 300 staff retrained for producing optical microlenses. The factory produced approximately 600,000 discs per year, with PlayStation orders making up half of its volume.

It's the state of demand for physical games media in microcosm. That demand exists, across several sectors — preservation, collecting, and so on — but physical game purchases are generally a smaller share compared to digital and have been for some time.

"People still buy physical video games," Piscatella said. "Just a lot fewer of them than they used to. I recently posted US physical video game spending over time on Bluesky. It's been a change more than a decade in the making. Nintendo platforms lead in share of physical video game sales and continue to do well. Xbox is the most digital-forward of all the platforms. Sony is in the middle but leans far more digital than Nintendo platforms do."

Sales of physical games also cost platform holders more. In 2020, Serkan Toto, the CEO of analyst firm Kantan Games, published a rundown of revenue differences between digital and physical sales. In general, publishers would make $45.50 selling a first-party game at retail and $35 on a third-party game sold at retail. Publishers selling a first-party digital game at $70 make $70.

Earning roughly $25 more per sale might not sound like business-altering levels of improved profits. But Sony discontinuing sales of physical media is part of a strategy to maximize profits from a dwindling consumer base in any way possible. While some publishers are finding wild levels of success selling comparatively inexpensive games at low prices across multiple demographics, Piscatella doesn't see Sony or Microsoft pumping out their versions of Meccha Chameleon. At least, not yet.

"The console audience has been, on average, becoming older and more affluent over time," Piscatella said. "Younger players are, generally, more often choosing to play more easily accessible and low-cost games on mobile and PC devices than prior generations. The high (and rising) comparative prices of video game console hardware and content are only strengthening those barriers to entry. Over the long-term, if things stay as they are, the console addressable market will continue to age up and become more affluent, and the console ecosystem will need to drive more and more revenue from a declining audience in order to find growth."

Only Nintendo has found consistent success targeting its products at younger audiences, Piscatella said. And Nintendo is implementing variable pricing across its digital storefront, selling remakes and non-core games at lower costs while reserving its steep $80 price for games like Tears of the Kingdom or Mario Kart World. Whether Sony ends up doing the same remains to be seen. However, ending physical production gives the platform complete control over pricing and availability. If you want a PlayStation game, you'll either pay full price for it or wait for a discount and hope it's deep enough to make it affordable for you. No trade-ins. No resale.

It's a potentially risky move.

"It's math," Piscatella said in another Bluesky post. "Potential revenues, costs, margins, assumed digital conversion rates, time, focus and energy. It'll be up to the players as to whether or not that math was correct."

Until that point, expect the presence of physical games to shrink in general. Piscatella said he never expected physical media support for Xbox's Project Helix, though Microsoft may launch a peripheral that reads it. That leaves Nintendo and other, smaller publishers that specialize in physical media, like Evercade. However, even many Switch 2 games aren't properly physical in the traditional sense. Most third-party publishers opt for game key cards or code-in-the-box. The prevalence of those formats is less certain, but Piscatella believes GTA 6 sales will be a signifier of their future and whether it makes sense for retailers to stock them.

At the very least, Piscatella expects Nintendo to continue investing in physical media production for the duration of the Switch 2's lifecycle, which he believes will last into the 2030s.