- An insider states that PlayStation is moving away from physical games to increase its profit margins.
- It is also said that PlayStation likely does not mind losing customers who prefer discs over digital purchases.
- The gaming giant hopes to maximize revenue from both first-party and third-party titles through this move.
PlayStation recently announced plans to end physical games production for good, inviting tons of backlash and criticism. On one hand, this move doesn’t come as too big a surprise due to the popularity of digital libraries today, but many feel betrayed by Sony’s abrupt announcement.
Amid the chaos, an insider notes that PlayStation’s decision seems driven purely by a focus on profit margins.
Why it matters: With console sales stagnating and game budgets on the rise, gaming giants like PlayStation are doing everything they can to maximize profit margins.
Discussing Sony’s motivation behind moving to an all-digital future for PlayStation, Jason Schreier broke down PlayStation’s margins on digital and physical sales.
For first-party titles, the gaming giant typically loses out on 30% of the sales revenue from a $70 title. Additionally, it loses further money when factoring in production, shipping fees, etc., for the disc.
On the other hand, PlayStation keeps 100% of the digital revenue from first-party sales due to those games being available on its own storefront. For third-party titles, PlayStation earns a small license fee of around 15% on each boxed sale.
When sold digitally, the same game nets PlayStation a bigger cut, closer to 30% on each unit sold.
The biggest one (reasons) is that they are going to boost their margins significantly for every sale that they make. Customers do not benefit from this.
-Jason Schreier
According to Jason Schreier, PlayStation’s pivot to digital games isn’t necessarily related to taking gamer choice away or controlling the market. Instead, he notes that this decision is all about economics and increasing profit margins.
The insider also states that PlayStation has likely done the math and come to the conclusion that losing its current physical games audience would not be too big a blow to the business.
What do you think about PlayStation’s decisions a week after its initial announcement? Let’s discuss in the comments and on the Tech4Gamers Forums.
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[Senior News Reporter]
Avinash is currently pursuing a Business degree in Australia. For more than 5 years, he has been working as a gaming journalist, utilizing his writing skills and love for gaming to report on the latest updates in the industry. Avinash loves to play action games like Devil May Cry and has also been mentioned on highly regarded websites, such as IGN, GamesRadar, GameRant, Dualshockers, CBR, and Gamespot.
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