Your Loyalty To Sony Or Xbox Means Nothing, Analyst Says

In response to Sony announcing that it will stop producing physical game discs for PlayStation starting in 2028, a lot of people have had a lot of things to say. One of those voices is Circana analyst Mat Piscatella, who offered a refreshing, if not brutal, reminder that your loyalty and love of PlayStation--or any other game console or franchise--means nothing to the corporate overlords controlling them. It's all about money, and it always has been.

"You can love your preferred video game ecosystem, franchise, or whatever all you want. You can think your years of customer loyalty should/will be reciprocated. But these businesses don't love you back. Same with your job, fwiw. You're a number on a spreadsheet," he said.

Piscatella also pointed out that, with forecasts for the PS6 and Project Helix to cost $1,000 or more (if they are ever released), console manufacturers like Sony and Xbox will "prioritize profitability" where they can. The thinking is that, if Sony can't convince as many people to buy a very expensive console, it can make up some of the difference by cutting out discs to improve margins.

As reporter Jason Schreier breaks down in a great video, a company like Sony would take home about $45.50 from the sale of $70 game sold at retail on a disc. With digital games, Sony keeps the full $70. It's not hard to see why Sony is shifting to an all-digital future.

Third-party games will go all-digital on PlayStation in 2028 as well, and this will help those publishers make more money (by way of improved margins), and Sony will make lots more money as well through collecting its platform fees.

"Digital is just too lucrative"

Dr. Serkan Toto of Kantan Games said Sony is not going to reverse its decision on killing off physical game discs because the money to be made in an all-digital world is too lucrative to ignore.

"I sympathize with physical media fans, but Sony will not reverse this decision," Toto told IGN. "They of course knew what the online reaction would look like, and they now wait for this storm to pass."

"Sony has over 120 million active PlayStation users," he added. "Around 50 million people subscribe to PlayStation Plus. As a thought experiment, let's say 500,000 cancel in protest, that would be just 1% of that business gone--of course not enough to Sony to start rethinking. Digital is just too lucrative."

The numbers

According to IGN's accounting, a first-party PlayStation game sold on a disc at retail would see Sony keeping about 65% of the sale price, with about 30% going to the retailer; the other 5% is for the manufacturing costs.

A third-party game sold on a disc at retail--say, a Call of Duty game from Activision--would provide Sony a licensing fee of about 15%.

For a digital game, a first-party game sold via the PlayStation Store would net Sony all of the revenue. For third-party games, Sony would collect its 30% cut as the platform owner. That works out to about $21 for a $70 game. When all games go digital in 2028, Sony stands to make significantly more money, as you can see.

What's next

For what it's worth, while Sony has confirmed plans to kill discs, Microsoft has not yet announced plans, but many are theorizing the next Xbox will be all-digital as well. After all, the numbers show that the share of digital game sales only continues to grow at Sony, Microsoft, Nintendo, and third-party publishers.

Sony still sells many millions of physical PlayStation game discs annually, and there are many people who want to see physical media live on. There are also real game preservation concerns in an all-digital world. More than 225,000 people have signed an online petition calling on Sony to reinstate physical games.

The obvious enthusiasm for physical media is unlikely to change the calculus for Sony for the main reason Piscatella and Toto laid out: money.