Are we heading for an exclusively digital gaming industry? Will the physical format completely disappear? How does this affect us as consumers? Juan Carlos Luque López explores the possibility of a future digital-only gaming industry.
On June 11, 2020, Sony, one of the ‘Big 3’ of the gaming industry (along with Microsoft and Nintendo), made a revolutionary announcement: the PlayStation 5 would launch a digital-only, cheaper version that removed the disk drive to cut costs. This discless PlayStation 5 was sold with the standard console as a budget option. Later that year, on September 8, Microsoft followed Sony’s lead and announced the Xbox series S, a discless version of their primary console the Xbox Series X. It was a limited but cheaper alternative to their new console. This method of price cutting resulted in the ninth generation of video game consoles being the first to ever feature digital-only versions of consoles from the two biggest hardware companies in the market, opening a question for debate - are we heading for an exclusively digital gaming industry?
Finding an answer to this question isn’t easy, but the first thing we need to understand is that digital gaming is not only the industry’s future, but its present. According to research conducted by the firm Newzoo, as of December 2024, digital format games and other related digital products represented more than 95% of the total market value of the industry, while physical copies of games only constituted less than 5%. Much of this difference is explained by the growing relevance of mobile and PC markets, which are almost completely digital nowadays, but this phenomenon can also be observed in the annual reports of many of the biggest console-market companies in the industry.
Sony states 74% of PlayStation’s gaming sales were generated via digital downloads in the third quarter of 2024, while for Microsoft’s Xbox, that figure nearly reached 90%. But this trend isn’t only restricted to companies dedicated to the mobile and PC markets or to console developers. Capcom, the company behind legendary franchises like Resident Evil and Street Fighter, is a perfect example. While its digital units sold in 2016 only constituted 40% of their total sales, that number has increased to over 90% of the total sales in 2024. Nintendo is a regular outlier in the dominant trends of the industry and the company’s nonconformity isn’t exempt with this phenomenon, having very similar sales numbers for physical and digital copies of their games this year. However, the announcement of virtual cartridges (or game cards) as a new feature for the Switch 2 suggests that, albeit more slowly, they plan to eventually move towards the digital market.
While its digital units sold in 2016 only constituted 40% of their total sales, that number has increased to over 90% of the total sales in 2024.
But why is this happening? There are many reasons to believe that the future will be digital, but the answer is simpler this time: the leading companies are pushing for it. Firstly, it is cheaper for developers to publish their games on digital storefronts, as they spend less on distribution costs like manufacturing, packaging or shipping. This is also the reason most independent developers initially launch their games only on digital platforms, as it is costlier to physically distribute a game. Secondly, many logistical problems, like producing an adequate number of copies, are instantly solved by digitalisation. Digital production is simply easier and more convenient.
Finally, and most importantly - it sells more. From the data analysed before, it is clear that gamers have shifted towards digital purchases. This isn’t surprising, as digital consumption also brings benefits to consumers: games are now more accessible than ever, being available to purchase almost everywhere at any time; digital stores offer regular discounts and package deals that are usually absent at physical stores; the purchased units can’t get damaged and are easier to transport and store as they don’t take up space - and so on.
However, the physical format hasn’t yet said its last words. In fact, according to an analysis conducted by the firm Circana, the PlayStation 5’s Digital Edition sales only comprise 18% of the total life-to-date unit sales of PS5 hardware. This is explained by the resistance part of the community has towards complete digitalisation as the arrival of the digital format also entails some drawbacks. The first and most obvious issue is that digital games cost the same as physical games, while being a more minimalist product. Physical games are collectible items: they come in a box with a manual, concept art and other extras inside. Meanwhile, when buying digitally, you only get the game - or do you? In the majority of digital stores, you do not buy the games themselves, but their license of use. This discrepancy implies that you do not actually own your digital games, you only pay to play them temporarily. This means that you cannot share, gift or transfer your games to anyone, ending the second-hand market and making the inheritance of games impossible. Furthermore, the safety and prevalence of your digital games depends on the continuity of the platforms where you acquired them. In other words: your digital library will die with you, and that’s only assuming that the platforms, in which you have your games stored, will continue offering services until then. This latest argument also relates to the issue of video game conservation, another interesting issue regularly discussed in the community, as possessing physical copies of a particular game makes it more difficult for it to become ‘lost media’.
In conclusion, the weight of digital media is steadily increasing in recent years, with both big companies and consumers seemingly moving away from physical distribution and consumption. However, the community still resists complete digitalisation, as the costs of the disappearance of the physical format appear to still be too high. The current solution between this tension between physical and digital formats is a mixed model of production and consumption with most games offering both formats to consumers and allowing them to choose their preferred edition of the game. However, the promotion of new and appetising forms of digital consumption such as Xbox’s Game Pass suggest that, if there has to be a winner in this battle for the future of the industry, the digital format is in the lead.