In 2007, the first console game was released digitally. The sci-fi war shooter Warhawk for the PlayStation 3 was sold in stores as a Blu-ray disc, but was also available digitally on PSN. The game is largely forgotten today, but it was the first domino to fall in the slow but inexorable takeover of console gaming by the digital world.
Seventeen years later, the way major video game companies make money has completely reversed. While it used to be revenue from selling boxed versions at GameStop and Walmart, today it predominantly comes from selling digital downloads at console stores. Publishers like Electronic Arts make the majority of their money not even from game sales, but from “recurring revenue,” i.e. microtransactions in online multiplayer and free-to-play games like Driving me crazy And Apex Legends.
“Back then, before the PlayStation 4 came out, you were lucky if you got five to 10 percent of digital sales for a AAA game,” said Daniel Ahmad, director of research and insights at Niko Partners. My city in an interview. “Today, depending on the title, the share can be as high as 80 percent, but it can also be as low as 40 percent.” He noted that while the average split predominantly favors digital downloads (platforms like PlayStation report annual digital revenue shares of over 70 percent), it can still vary greatly from case to case.
In its annual report this yearCapcom revealed that about 89 percent of the games it sells are digital copies. The company expects that number to rise to nearly 94 percent in 2024. The report also highlighted how much more profitable these sales are. Kunitsu-Gami: Path of the Goddessa new Capcom game for $50 that doesn’t have a physical version is an example of this move. As a result, the company has actually been asked if it will continue to make physical games during the pandemic. its last annual shareholders meeting this week.
“Given that a significant number of end users demand physical games, we do not currently anticipate eliminating physical products,” the company said. The statement echoes a view expressed last year by Ubisoft SVP Chris Early. “Some people will always want to own the physical disc,” he said. said in a Q&A on the cloud gaming deal of French publisher Activision Blizzard. “I just don’t think it’s going to go away. Do I think physical sales might decline over time? Sure, but will it ever go away completely? I don’t think so.”
Aggregate data can sometimes obscure small but significant differences in popular trends. While it’s true that physical games have become a niche market in the broader gaming landscape – a shift accelerated by the pandemic – Early also pointed out that even a small piece of a big pie can mean a lot of money. According to GamesIndustry.biz Infographic According to Newzoo data, only 17 percent of console gaming revenue in 2023 came from boxed games, but that was still $9.5 billion. In other words, that’s still more than the Top 10 worldwide box office last yearincluding Barbie, OppenheimerAnd The Super Mario Bros. Moviecombined.
“If you look at the absolute numbers, Sony still sold a total of 286 million games last year,” said Ahmad My city“Even at a 70 percent ratio, that still means 85 or 86 million of them are physical, right? So, yes, it’s a small fraction, but by no means tiny.”
Games like God of War Ragnarök Resist digital trends
The market for physical copies of some first-party games, for example, remains surprisingly strong. One of the data that appears to have been released as part of the malicious Insomniac Games hack was that Total digital downloads for PlayStation Studios games until June 2023. 2018 Spider-Man and 2020 Miles Morales were downloaded a total of 13.6 million times, less than half of the 33 million sales reported in 2022. God of War Ragnarök was apparently only downloaded 4.2 million times compared to 11 million sales reported in January 2023.
According to Ahmad, physical sales of the Nintendo Switch are even stronger despite the general trend towards digital. Nintendo still reports that about half of software sales comes from physical releases versus digital editions, which include only digital games and additional content. But the difference is even more striking when you compare the breakdown of physical sales to digital sales of games available at retail. He estimates that Switch owners bought physical copies over digital ones 60 percent of the time in the first quarter of 2024.
“When it comes to digital sales overall, it’s absolutely massive,” Ahmad said more generally. “But if we just look at the split between physical and digital games that are physically released, it’s actually lower than that 70 percent and secondly, it’s definitely higher for AAA and first-party games, especially during the holiday season where gifts are a notable part of that.”
And even if some big games like Baldur’s Gate 3 And Alan Wake – The Wonderful World of Madness initially eschewed physical copies at launch, smaller games and indie releases that were previously digital-only are now working with companies like Limited Run Games to print physical editions and get them into the hands of their hardcore fans. “I think there will always be a demand for physical media,” said Josh Fairhurst, CEO of Limited Run My city in a recent interview. “We see that with music, it seemed like everything was going digital, and then the vinyl market exploded because people realized the downsides of buying digital because you don’t really own the music.”
He said the audience for it is definitely the largest on Switch and the smallest on Xbox. He estimates that for every Xbox version of a physical limited run game, two are sold on PlayStation and 10 on Nintendo’s platform. In addition to the physical connection fans have felt to the products since the NES and PS1 days, he believes fears over the lack of digital preservation are also driving physical game collecting.
“I think that’s going to happen more and more over time as more and more services shut down for whatever reason, because there’s always going to be something new, bigger, better that eventually goes out of style, no matter what distribution model is popular at the moment,” Fairhurst said. “I think people are going to be frustrated to see their digital purchases disappear.”
That’s not necessarily true for Xbox, where a large portion of this generation’s console sales have already been for the discless Series S and millions have subscribed to the Netflix-like rental service Game Pass. Fans now regularly share photos of almost exclusively digital Xbox sections in stores like Target and Best Buy, where cards with download codes have replaced plastic game cases. Major initial releases like Senua’s Saga: Hellblade II have skipped physical releases, and earlier this year a number of physical releases of smaller third-party games appeared to have been cancelled. Meanwhile, leaked plans suggested that Microsoft was at one point working on a Diskless mid-gen refresh for the Series X.
Earlier this year, Microsoft Gaming CEO Phil Spencer said Game file the company has no plans to give up physical media. “I would say our strategy does not depend on people switching completely to digital media,” he said. “And getting rid of physical media is not a strategic thing for us.” But all analysts believe that the Xbox will be the first console to do away with discs completely. Circana analyst Mat Piscatella tweeted earlier this year He expects Microsoft to soon go fully digital, Sony to follow soon after, and Nintendo to have at least two more hardware generations with physical media.
“As long as there are hard drives on the console, physical consoles will never completely disappear. There will always be demand for them as long as they are part of the console bundle,” Ahmad said. “However, if Xbox decides to stop offering hard drives in the next generation, for example, as we saw with the all-digital Series X, it probably won’t have a material negative impact on earnings given how niche sales of physical consoles are on the platform today.”
And even if companies continue to support physical formats, their advantages continue to dwindle. While discs and cartridges used to be plug-and-play, today they must be installed on the console and often require extensive day-one updates. It can take weeks or months for major bugs to be fixed or for highly requested gameplay features to be added in post-release patches. “With that in mind, a lot of people will say, ‘I’ll just get the digital version,'” Ahmad said. “It’s the same thing, just more convenient.”
