- Daniel Ahmad of Niko Partners says it was inevitable that Sony stopped production of physical discs
- He says it would have happened if not 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 something of a shock to the community, but one analyst believes the move was inevitable given the rise in digital sales of consoles.
Daniel Ahmad of Niko Partners shared his thoughts in a long thread about the X in response to a fan who compared the situation to Apple removing the headphone jack from its products, saying, “It’s more like Apple removing the CD drive from its laptops from 2008.”
He explained that while there were many complaints at the time, there is “not a single person complaining about it today”, nor were there many people complaining in the early 2010s. Ahmad attributes Sony’s decision to the fact that digital PlayStation software performs better now than it ever did before the PS4 launched.
“The first thing to note about Sony’s decision is that it was bound to happen at some point for consoles. If not PS6, then PS7,” Ahmad continued. “Full digital sales of games on PlayStation have gone from less than 10% before the release of PS4 to around 80% today.”
He added: “On Xbox it’s already over 90%, and if anything I’m surprised they weren’t the first to do it. Yes, those numbers only include digital games, reflecting the current market environment, but they don’t include DLC, microtransactions or subscriptions/free games.”
Ahmad shared a bit more data to support his claims, saying that around 50% of the PS5 user base subscribes to PS Plus and has built a large library and/or has access to numerous digital games.
“The truth is that the console ecosystem is almost entirely digital at this point,” he said, pointing to how Sony also earns revenue through digital add-on content, like microtransactions and other in-game purchases, more than it does “from the sale of physical and digital complete game sales combined.”
Play as Fortnite, Grand Theft A 5Minecraft, Call of DutyApex Legends, Marvel Rivals, Battlefield 6, and Arc RaidersAhmad pointed out, had the highest number of players on the PS5 in May, and half of them do not ship on a physical disc.
“Over 30% of PS5s sold to date do not have a disc drive (meaning 70% do),” the analyst added. “However, more importantly, the current sales rate for digital-only PS5s is over 50%.”
Ahmad also said that Insomnia Games’ sales numbers, which have been presented as evidence that physical sales represent a good portion of PS5 sales, are “outdated” and “people are looking at the number of sales instead of the sell-through number.”
He explained that one of the reasons retail is high for certain physical games is “because Sony counts bundles as retail even though 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.” Because of the margins between physical and digital games, Sony can keep 100% of first-party games sold on the PlayStation Store, but it makes $21 (30%) on a $70 third-party title.
“When that [Sony] sells a third-party game at retail, it makes about half that amount, even though the player spends the same $70,” he said. “The difference is not that significant for third-party publishers, but they would prefer to sell all games digitally if they could for the higher margins. Therefore, physical game revenue only accounts for 5% of Sony’s total game software sales revenue (incl. DLC/MTX), despite accounting for a higher % share of units sold. When Sony said it would stop publishing games on PC, no one pointed out that it made essentially the same profit from PC sales as it does from physical disc sales, and the former was considered too little.”
Ahmad said another reason is the market we’re in at the moment, where console prices seem to be rising regularly. Sony knows that the PS6 can enter a market where other hardware is over $1000 and gamers will think twice about upgrading on day one.
“While part of it is to reduce costs, it’s also a recognition that consoles will no longer be $199 mass market devices and they will have to focus on hardcore gamers who are willing to spend more than ever,” he said.
A third reason would be Sony’s desire to create a “closed ecosystem with high margins.”
“The withdrawal from PC 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, gift or even refund physical games. With digital games you don’t have the same rights at the moment,” said Ahmad. “As Sony looks to maximize spend per user, it essentially ends the used market for PS6 software and ensures that any software sold is high margin and they capture a %. In other words, Sony controls the license in its entirety and access is dependent on them.”
Ahmad concluded, calling Sony’s failure to announce what will happen to PS4 and PS5 discs “a mistake,” and had it “talked about a disc for a digital program or confirmed a disc addition for PS6, the backlash wouldn’t have been so strong.”
The analyst also said it’s “unlikely” Sony will reverse the decision, but “wouldn’t be surprised if they end up clarifying certain aspects.” However, Ahmad believes that 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’m also of the belief that even if the PS6 is $1,000, used physical games help increase the overall affordability,” he said.
Ahmad concluded by saying the conversation needs to shift to “consumer rights” and what digital game ownership really means.
“Whether we’re talking about bringing back physical or embracing digital, the conversation needs to shift to consumer rights and what a license should enable. Stop Killing Games was part of that, but gifts, family sharing, refunds and other aspects are just as important,” he said.
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