A gaming consultant and analyst has shed light on what the numbers could look like for businesses PlayStation and Xbox in an all-digital future, suggesting that the move to a disc-free industry could increase profits by as much as 54%. It's no secret that the production of video games and game consoles is becoming more expensive and that large companies are looking for ways to improve their profit margins. A recent example was PlayStation's sudden decision to stop printing new video game discs starting in January 2028.
PlayStation's announcement sent shockwaves through the gaming community, with many expecting Xbox to follow suit and abandon physical discs in the near future. One of the first arguments in PlayStation's favor was that more than 80% of gamers already bought digital games, making the move seem inevitable. However, analysts later disputed that claim, arguing that digital purchases account for the largest share of sales because they include a much wider range of content, such as DLC. They believe that PlayStation is abandoning discs just to increase profits.
PlayStation will continue to support physical games beyond 2028
Sony's controversial decision to stop production of physical PlayStation games after January 2028 comes with a notable asterisk that provides some leeway.
According to an analysis from Dr. Serkan Toto, CEO of KantanGames Inc., says about 35% of the revenue from each physical disc sale of a first-party game goes toward production, shipping and retail costs. Third-party studios spend more on printing discs, around 50%, because they also pay licensing fees to platform holders such as Sony, Xbox and Nintendo. For digital games, the third-party publisher's only payment is a 30% store cut, which is about $21. That leaves them with about $49 in revenue from a $70 game. First-party studios do not pay these fees and keep the full $70 for each digital sale.
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Dr. Serkan Toto says, “This means from a purely economic perspective, Sony, Microsoft and Nintendo are more motivated to avoid physical media on both an absolute and relative basis.” Industry analyst Piers Harding-Rolls also notes that selling games digitally only presents an opportunity that could benefit developers and publishers in the long term. The numbers suggest that releasing records can increase the amount of money publishers keep. However, the key question is whether focusing on profit alone will help the industry grow or risk damaging it in the near future.
Digital vs. First party physical sales profit
|
Cost/Price |
First party digital game |
First-party physical gameplay |
|---|---|---|
|
Price |
70 USD |
70 USD |
|
Retail/digital store down ~30% |
-$0 |
-21 USD |
|
License fee ~15% |
$0 |
$0 |
|
Manufacturing ~5% |
$0 |
-$3.50 |
|
Publisher's share (profit) |
70 USD |
$45.50 |
With GTA 6 just by raising prices to $80, the industry could see more AAA titles priced at that level rather than sticking to the traditional $70 standard. So the total profit that companies can earn from digital sales can potentially exceed the given numbers. That said, there are some important points to keep in mind. According to Dr. Toto, the discussion can be almost endless, so factors like sales taxes, a deeper financial comparison of physical vs. digital, and an ocean of other details like store boxes containing download coupons are omitted for brevity. For example, the profit figures are calculated to compare physical and digital sales before tax. Second, there may be additional production costs depending on each country's market that are not fully accounted for as publishers and sellers typically do not disclose these. In addition, each platform may have its own privacy policies and fees, which may affect the final figures. So, as Dr. Toto puts it, his analysis is “not an exact science.”
To be perfectly fair, operating, maintaining and expanding platforms like PlayStation, Xbox and Nintendo have certainly become more expensive in today's economy. There is also an ongoing shortage of RAM and storage, which has raised concerns about the future of gaming hardware. However, some argue that large companies such as Sony and Microsoft focus more on increasing profits from existing customers rather than reducing costs or improving production efficiency. As a result, many feel that gaming is becoming less affordable for the average player every year. And it is still unclear whether this trend will improve over time.
