Of the three major console manufacturers, Xbox is the most digital-centric platform. Microsoft's presence in the physical media market has been declining for years as it focused on GamePass, PC games and cheaper all-digital consoles.
Recent rumors point to Microsoft's layoffs impacting its brick-and-mortar retail division. In addition, Christopher Dring, editor-in-chief of foreign media Gamesindustry, said that several European retailers have not restocked physical Xbox games.
As Christopher Dring said, Xbox physical game sales are too low to attract much interest from retailers. This makes most retailers reluctant to put physical discs on store shelves.
The retailer also acknowledged that Xbox is now more of a digital platform. According to a senior European publisher, selling Xbox consoles is not of much benefit to them due to razor-thin margins.
Once consumers purchase a console such as Xbox Series S|X, they mostly purchase GamePass subscriptions or digital games.
Christopher Dring said: "Across Europe, several retailers have begun to no longer list Xbox."
Meanwhile, PlayStation still has a sizable physical market share. Likewise, most of the games sold on Switch are physical versions.
This seems to be the natural evolution of the Xbox platform. Since Microsoft aims to provide an ecosystem, it has a huge market on Windows. The platform itself is fully digital, pushing Microsoft further away from physical media.
Although there are rumors that Microsoft's next-generation console will be an all-digital Xbox Series X, the gaming giant will not give up on the physical market in the near future.
However, no one can predict what will happen in the next generation. A strong push for cloud gaming, higher expectations for GamePass, and market preferences could mean Xbox's future is moving away from physical gaming.