Analyst Reveals How Much More Profitable Digital Games Are Than Physical

A gaming consultant and analyst has shed light on what the numbers could look like for companies like PlayStation and Xbox in an all-digital future, suggesting that the shift to a disc-free industry could increase profits by as much as 54%. It is no secret that video game and gaming console production is becoming more expensive and that major companies are looking for ways to improve their profit margins. One recent example was PlayStation’s sudden decision to stop printing new video game discs starting in January 2028.

PlayStation’s announcement sent shock waves through the gaming community, with many expecting Xbox to follow suit and abandon physical discs in the near future. One of the initial arguments in PlayStation’s favor was that more than 80% of gamers were already buying digital games, making the move seem inevitable. However, analysts later challenged that claim, arguing that digital purchases account for the largest share of sales because they include a much broader range of content, such as DLC. They believe PlayStation is abandoning discs only to boost profits.

According to an analysis from Dr. Serkan Toto, CEO of KantanGames Inc., about 35% of the earnings from each physical disc sale of a first-party game goes to production, shipping, and retail costs. Third-party studios spend more when printing discs, around 50%, because they also pay licensing fees to platform holders like Sony, Xbox, and Nintendo. For digital games, third-party publishers’ only added payment is a 30% store cut, which is about $21. That leaves them with about $49 in revenue from a $70 game. First-party studios do not pay these fees and keep the full $70 for each digital sale.

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Dr. Serkan Toto says, “That means from a purely financial perspective, Sony, Microsoft, and Nintendo are more incentivized to shun physical media on both an absolute and relative basis.” Industry analyst Piers Harding-Rolls also notes that digital-only game sales present an opportunity that could benefit developers and publishers in the long run. The numbers suggest that dropping discs could increase the amount of money publishers keep. However, the key question is whether focusing on profit alone will help the industry grow or risk harming it in the near future.

Digital Vs. Physical First-Party Game Sale Profit

With GTA 6 already raising prices to $80, the industry could see more AAA titles priced at that level rather than sticking to the traditional $70 standard. So, the overall profit companies may earn from digital sales could potentially exceed the given figures. That said, there are a few key points to consider. According to Dr. Toto, the discussion can be almost endless, so factors like sales taxes, a deeper economic comparison of physical vs. digital, and an ocean of other details like retail boxes containing download vouchers are left out for brevity. For example, the profit figures comparing physical and digital sales are calculated before taxes. Second, there may be additional production costs depending on each country’s market that are not fully accounted for because publishers and sellers typically don’t disclose those. On top of that, each platform may have its own private policies and fees, which can affect the final numbers. So, as Dr. Toto puts it, his analysis is “not an exact science.”

To be completely fair, running, maintaining, and expanding platforms like PlayStation, Xbox, and Nintendo have indeed become more expensive in today’s economy. There is also an ongoing RAM and storage shortage, which has raised concerns about the future of gaming hardware. However, some argue that big corporations like Sony and Microsoft are focusing more on increasing profit from existing customers rather than reducing costs or improving production efficiency. As a result, many people feel that gaming is becoming less affordable for the average player every year. And it is still unclear whether this trend will improve over time.