- Niko Partners’ Daniel Ahmad says Sony ending physical disc production was inevitable
- He says it would have happened if it wasn’t for the PS6, then the PS7
- Ahmad says Sony wants to create a ‘closed ecosystem with high margins’
Sony’s decision to end production of physical PlayStation discs in 2028 came as a huge shock to the community, but one analyst believes the move was inevitable given the rise in digital sales on consoles.
Sharing his thoughts in a long thread on
He explained that while there were a lot of complaints at the time, “not a single person is complaining today,” and there weren’t many people complaining in the early 2010s either. Ahmad attributes Sony’s decision to PlayStation’s digital software now working better than before the launch of the PS4.
“The first thing to note about Sony’s decision is that it will inevitably happen at some point for consoles. If not for PS6, then for PS7,” Ahmad continued. “Digital sales of full games on PlayStation have gone from less than 10% before the launch of the PS4 to around 80% today.”
He added: “On Xbox it’s already over 90%, and if anything, I’m surprised they weren’t the ones to do it first. Yes, these numbers include digital-only games, which reflects the current market environment, but they don’t include DLC, microtransactions, or subscriptions/free games.”
Ahmad shared a bit more data to back up his claims, saying that around 50% of the PS5 user base is subscribed to PS Plus and has built up a large library and/or has access to numerous digital games.
“The truth is that the console ecosystem is almost entirely digital right now,” he said, noting how Sony also makes money through additional digital content, such as microtransactions and other in-game purchases, rather than “from selling full physical and digital games combined.”
Games like fortnite, Grand Theft A 5minecraft, ObligationsApex Legends, Marvel Rivals, Battlefield 6, and Arch RaidersAhmad noted, had the most players on PS5 in May, and half of them don’t ship on a physical disc.
“More than 30% of PS5s sold to date do not have a disc drive (which means 70% do),” the analyst added. “However, most importantly, the current digital-only PS5 sales rate is above 50%.”
Ahmad also said that Insomnia Games’ sales figures, which have been presented as evidence that physical sales account for a good portion of PS5 sales, are “outdated” and “people are looking at sales in numbers rather than direct sales.”
He explained that one of the reasons retail is high for certain physical games is “because Sony counts bundles as retail sales, even if it’s a digital code with the console.”
One reason he believes Sony is moving forward with an all-digital future is simple: “The economic argument.” Due to profit margins between physical and digital games, Sony can retain 100% of first-party games sold on the PlayStation Store, but makes $21 (30%) on a $70 third-party title.
“When [Sony] If you sell a third-party game at retail, you make about half that amount, even if the player spends the same $70,” he said. “The difference isn’t as stark for third-party publishers, but they would prefer to sell all games digitally if they could for higher margins. That’s why physical game revenue represents only 5% of Sony’s total gaming software sales revenue (including DLC/MTX), despite representing a higher percentage of units sold. “When Sony said it would stop publishing PC games, no one pointed out that it essentially made the same amount from PC sales as it did from physical disc sales, and the former was considered very little.”
Ahmad said another reason is the market we are currently in, where console prices seem to increase regularly. Sony knows that the PS6 could enter a market where other hardware costs more than $1000, and gamers will think twice before upgrading on day one.
“While part of this is cutting costs, it’s also understanding that consoles will no longer be $199 mass-market devices and will need to focus on hardcore gamers who are willing to spend more than ever,” he said.
A third reason would be that Sony wanted to create a “closed ecosystem with high margins.”
“The PC retreat is partly about this, the end of disc production is also about this, as is the exploration of different form factors. Right now you can resell, give away or even refund physical games. With digital games, you don’t have the same rights currently,” Ahmad said. “As Sony seeks to maximize spend per user, it is essentially ending the used market for PS6 software and ensuring that all software sold is high margin and they capture a percentage. In other words, Sony controls the license entirely and access is up to them.”
Ahmad concluded, calling Sony’s lack of announcement about what will happen to PS4 and PS5 discs “a mistake,” and if it “talked about a disc-to-digital program, or confirmed a disc add-on for the PS6, the reaction wouldn’t have been as strong.”
The analyst also stated that it is “unlikely” that Sony will reverse the decision, but “we would not be surprised if they end up clarifying certain aspects.” However, Ahmad believes it could support physical games for a few more years, perhaps through limited-run hardware or a more expensive PS6 compared to the digital version.
“I also think that even if the PS6 costs a thousand dollars, used physical games help increase overall affordability,” he said.
Ahmad concluded by saying that the conversation should turn to “consumer rights” and what digital game ownership really means.
“Regardless of whether we’re talking about bringing back physical or embracing digital, the conversation needs to turn to consumer rights and what a license should allow. Stop Killing Games was one part of this, but gifting, family sharing, refunds and other aspects are equally important,” he said.
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