Recently, PlayStation announced plans to completely discontinue the production of physical game discs, a move that triggered widespread backlash and criticism. On one hand, this move isn't surprising given the popularity of digital game libraries today, but on the other, many gamers feel betrayed by Sony's sudden announcement.
Amid the chaos, one industry insider noted that PlayStation's decision appears to be purely profit-driven. When discussing Sony's motivations for pushing for an all-digital future, Jason Schreier broke down the difference in PlayStation's profit margins on digital and physical sales.
For first-party games, Sony typically loses about 30% of its revenue from the sale of a $70 game. In addition, coupled with the production and transportation costs of optical discs, profits are further compressed.
Sony, on the other hand, is able to keep all digital revenue because first-party games are sold on its own store. For third-party games, Sony gets about 15% of the licensing fee on each physical sale. Digital version sales bring Sony a higher share, close to 30% of each copy of sales.
Schreier said: "The biggest reason is that they (Sony) will significantly increase their profit margin on each sale. The consumer will not get any benefit from this."
According to Schreier, PlayStation's shift to digital games is not out of an intention to take away player choice or control the market, but purely based on economic considerations - to increase profit margins.
He also noted that Sony has likely done the math and concluded that even losing some of its current audience for physical games wouldn't be a big hit to the business.
What do you think about this? Do you think Sony's strategy will work? Welcome to discuss in the comment area.