Since Sony announced that it was planning to stop producing physical PlayStation discs in 2028, many people have been justifiably worried about how they will maintain ownership and long-term game access in a disc-free world. But halting production of PlayStation discs also means eliminating the market for cheap used PlayStation discs, which are often available for well below the price of a digital download.
How much is this disc-based discount worth? To find out, Ars analyzed how the prices of 19 current top-selling PlayStation games varied between digital downloads and physical discs (both new and used). We found that, while used discs are the cheapest option for most games for most of the year, the frequent and periodic deep discounts offered on the PlayStation Store often undercut the cheapest game disc options. That state of affairs will likely persist even in a future without PlayStation discs.
Our prices are so low, you'll think we've suffered brain damage
For our analysis, we started with Sony's list of the bestsellers on the PlayStation Store. We eliminated any games that weren't available on a physical disc, then used the database over at PlatPrices.com to determine both the "Standard" price and the lowest "Discount" price offered for those games on the PlayStation Store in the last year (as well as the total number of days the discount price was offered).
Sony has patented a modular PlayStation controller featuring a detachable touchscreen, rotating navigation dial, and magnetic components, hinting at a more customizable future for PlayStation gaming.
4 generations of Xbox hardware. (GeekWire Photo / Thomas Wilde)
Commentary: The last couple of weeks have served as a capstone to what’s become a bad few years for the international video game industry. Now it appears the larger sector is headed directly into a significant crash, as several unsustainable practices all seem to be approaching a crisis point at once.
The first and most obvious issue is the ongoing component shortage. Due to the rush to build AI data centers, both RAM and solid-state drives have risen dramatically in price in 2026, with analysts forecasting that costs might not settle back down until at least 2028.
Both the PlayStation 5 and Xbox Series X|S are at the point in their life cycle when they’d ordinarily be declining in per-unit costs as the technology matured. Instead, both Sony and Microsoft have raised console prices multiple times this year due to the high demand for parts.
This would ordinarily be a great time to get into video games, as we’re almost six years into the current console generation. Instead, it’s one of the worst. The base PS5 and Series X are about as expensive as they were at launch in November 2020, and building a new gaming PC right now can be costly.
The component crunch also harmed the debut of Valve’s new Steam Machine, which officially launched late last month with a starting MSRP of $1,049. Valve, based in Bellevue, Wash., was forced to offer the new hardware at a significantly higher price than planned due to the difficulty in getting components.
That’s been reflected in its early reviews, with manyoutletsnoting that the Steam Machine’s current price doesn’t match its power. At $700, the Machine would be a great gateway product for PC gaming, the way the Steam Deck was, and a genuine competitor in the console field, but a $1,049 price tag makes it an expensive curiosity for financially secure gadget-heads.
Another bad sign came from Sony’s recent announcement that it would sunset physical media for the PlayStation platform by 2028. This decision, which allegedly took many of Sony’s publishing partners by surprise, has serious knock-on effects for collectors, historians, developers, and most prominently consumers.
Sony has already caught one lawsuit over alleged market exploitation on the PlayStation Store, and that was a few days before it announced it wants to kill discs. An all-digital PlayStation library means that Sony would get to exercise full monopolistic control over pricing and access for every game it sells; licensing agreements mean that anything purchased on a digital storefront like the PlayStation Store is subject to deletion at any time without notice; and players wouldn’t be able to resort to any of the usual cost-cutting measures such as bargain bins, buying used copies, or even trading games with a friend.
That suggests that Sony has decided its best path forward is to continue to extract money from its established audience, rather than to have more options in place for gaming on a budget. There are free-to-play games on the PS5, of course, but most if not all are cross-platform and/or designed as money sinks. Ask any parent whose kids accidentally ran up a big tab in Fortnite.
Sony’s PlayStation 5. (Sony press image)
If Sony has decided to end physical media, then it’s likely Microsoft will follow suit. While Xbox hasn’t mentioned its next-generation console, codenamed Project Helix, for a hot minute, it has been eager to get rid of discs since at least 2013. Some sources, such as Windows Central, allege that Xbox is already planning to do so.
(Meanwhile, Nintendo is likely to do its own thing. While Nintendo has been forced to raise the price of the Switch 2 alongside its competitors, it has offered no sign that it plans to stop selling game cards or Switch cartridges. In an uncertain world, Nintendo can be relied upon to only ever follow its own peculiar instincts.)
This sets up an early look at the environment that surrounds the 10th generation of console hardware. If both Sony and Microsoft stick to traditional timelines, we’re likely to start hearing more about the PlayStation 6 and Project Helix over the course of 2027, with launch in holiday 2027 or 2028.
If they do launch along that timeline, then it’s difficult to see how either system will retail for less than $1,000, since the storage and RAM supplies will still be constrained by that point. That automatically prices most of the potential audience out of the market. Once the starting costs hit the four-digit range, a console stops being a hobby or a toy for children and becomes an expensive extravagance. (As a general rule, you probably don’t want your console to cost significantly more than the TV you’re attaching it to.)
Further, it’s arguable that neither the PlayStation 5 nor the Xbox Series X|S have really hit their potential. Sony has famously squandered much of this generation on a largely abortive pivot to games-as-a-service, while Xbox has often seemed more interested in laying off developers than actually making or marketing games. The 9th generation of consoles has had a few big hits, but it’s mostly despite itself.
Not only is there likely to be limited demand for the 10th-generation PlayStation or Xbox, but neither of them actually seem necessary. The only reason to make them is for a brand refresh, and that’s got nothing to do with consumers.
Microsoft, following its acquisition of Activision Blizzard in 2023, is currently the second largest game developer in the world, while Sony dominates today’s console market. These two companies influence much of what happens in the modern video game industry, and as of right now, both are apparently determined to do the most short-sighted thing possible at any given time.
Sony has decided that only part of its audience actually matters, while Microsoft seems to be saddling Xbox with unrealistic expectations, possibly to justify its eventual sale or shutdown, and is ignoring at least one organized boycott.
Reggie Fils-Aimé (center) leads a roundtable discussion of Xbox architects to celebrate the platform’s 20th anniversary in 2021. Left to right: Robbie Bach, Ed Fries, Fils-Aimé, Peter Moore, Bonnie Ross. (Microsoft Alumni Network)
Whenever the video game industry undergoes any kind of significant disruption, someone somewhere always asks if it’s the start of another “Crash of ‘83.” This is usually hyperbole, but it’s hard not to see the parallels between then and now: the video game market is flooded, there are few true exclusives left outside of Nintendo, many members of the gaming audience buy as few as 2 games a year, and the end of physical media will end both retail support and much of the casual audience.
This is unfolding as a slow, years-long plummet rather than the comparatively sudden shock of ‘83, but a crash is a crash. It’s avoidable, but it would require a massive, simultaneous course correction from several of the largest entertainment companies in the world.
That being said, it’s unlikely that video games as a medium are facing any kind of existential threat. Nintendo, as noted above, is well-positioned to ride out any potential problems with the larger market, PC gaming is hanging on, and the mobile sector is actually having a sort of quiet renaissance right now. There will still be video games to play in 2030, barring some larger disaster.
If there’s one big opportunity here, it’s that many of the major players in the games industry have either voluntarily abandoned the market for budget gaming or have been forced out by component costs. Some of the biggest hits of the 2020s to date, such as Vampire Survivors, Among Us, Lethal Company, and Balatro, are cheap, retro-styled games designed to run on almost any hardware, from a PlayStation 5 to your 4-year-old tablet.
The best step forward for mainstream gaming, then, might actually be to take a step back, in a similar way to projects such as Panic’s Playdate retro handheld (still going strong 5 years later) or Seattle’s Tin Can, seeing success with its land-line phones for kids and families. Chasing bigger games, higher frame-rates, and more realistic graphics for 30 years has gotten us here, up to the edge of a second major crash, while thousands of people log on every day to play games that could be run on a particularly big potato.
Instead of rushing into the 10th generation, the solution now might be to think simpler and cheaper, making smaller, more focused projects rather than the 5-year moonshot of a typical AAA game. Otherwise, mainstream video games may end up like Western comics: increasingly expensive options presented to a shrinking handful of fervent fans.
Xbox at a gamescom briefing in 2014. Microsoft is pressing its games division to turn a profit. (Microsoft Photo)
In 2007, Microsoft’s Xbox 360 consoles started dying — overheating until three lights on the front blinked red, a defect gamers came to call the “red ring of death.” Microsoft’s response was to extend the warranty on every machine and take a charge of more than $1 billion to fix the problem, making it one of the costliest product failures in the company’s history.
Microsoft could afford it financially, but the bigger factor was strategy. Xbox was a bet on the living room, and for a company minting money on Windows and Office at the time, losing a billion or so was a justifiable cost of staying in the game.
Nearly two decades later, that patience has run out.
“Going forward, this cannot continue,” the new Xbox CEO Asha Sharma wrote in a memo to employees last month, offering a blunt assessment of a business that has spent more than $20 billion over five years, only to see its core revenue fall by nearly half a billion dollars, running at a thin 3% profit margin, by Microsoft’s own internal measures.
With thousands of layoffs expected to be announced across Microsoft as soon as next week, the Xbox division is likely to be among the hardest hit.
The cuts reach across the company — including sales and consulting — part of a restructuring that has become routine around the close of Microsoft’s fiscal year. But for Xbox, they’re an early step in a broader effort to reset the business, rein in costs, and position the division for healthier profits.
Microsoft CEO Satya Nadella has been blunt about it: the company has spent years subsidizing Xbox rather than profiting from it, and that era is over. The videos and livestreams of people playing Xbox games that fill YouTube generate more money than Microsoft makes from the games themselves, he noted in an appearance on the Hard Fork podcast.
“No one can accuse Microsoft of not having invested for the last 25 years,” Nadella said. “And now we have to turn this into a sustainable business.”
Long-term strategic bet
Turning it around means breaking a pattern that runs through Xbox’s history.
Xbox launched in 2001 and lost money for most of its first decade. Microsoft absorbed the losses and stayed in — going up against Sony’s PlayStation and Nintendo — because it saw a strategic prize in owning a piece of the living room, and later mobile. Online gaming also gave the company early experience running services at scale, which fed its cloud ambitions.
Over time, the goal shifted from selling hardware to selling subscriptions.
Xbox Live, launched in 2002, turned online play into recurring revenue. Game Pass, which arrived in 2017, let players pay a monthly fee — the top tier is about $23 — for a library of games, including Microsoft’s own new releases the day they come out. The idea was to get people paying for Xbox everywhere: consoles, PCs, phones and the cloud.
And when growth stalled, Microsoft doubled down. It paid $7.5 billion in 2021 for Bethesda, the studio behind Fallout and The Elder Scrolls, then $69 billion in 2023 for Activision Blizzard (whose games include Call of Duty, World of Warcraft, Diablo and the mobile hit Candy Crush) the largest acquisition in Microsoft’s history.
A series of economic headwinds
In recent years, almost everything about the economics of gaming has turned against Xbox at the same time.
Hardware loses money, and AI is making it worse. Microsoft sells consoles at or below cost, banking on games and subscriptions to make up the difference. But AI data centers are consuming so much memory and storage that chip prices have spiked. That has forced Microsoft to raise Xbox console prices, most recently a $100-to-$150 hike this summer that it blamed directly on component costs.
Xbox lost the console war. By most estimates, Sony’s PlayStation 5 has outsold the Xbox Series X and S more than two to one. A smaller base means fewer game sales and subscriptions to offset the upfront hardware losses. That has left Xbox a distant second for the entire generation.
Revenue is shrinking. Even setting aside the games it gained from Activision, Xbox’s annual revenue has fallen nearly $500 million over five years — while the money going into the business keeps climbing. It has been investing more to earn less.
Microsoft’s most recent quarterly filing shows gaming revenue of $16.8 billion for the nine months through March, down about $1.1 billion, or 6%, from a year earlier.
Game Pass cuts into sales. Handing subscribers a new game the day it launches undercuts the roughly $70 they would have paid to buy it. The service delivers steady subscription income, but thinner economics on the games themselves.
Activision didn’t fix the margins. Even with one of gaming’s most profitable businesses folded in, Xbox earns only about 3 cents of profit on every dollar — well under the 17 to 22 cents typical in the industry. If the biggest acquisition in company history can’t move the margin, little will.
Every spare billion is flowing to AI. Microsoft is pouring more than $100 billion a year into the data centers and chips behind its AI push, trying to capitalize on the boom. Against a risk and payoff that big, a gaming business that barely breaks even feels like yesterday’s strategic bet.
What’s next for Xbox
The cuts have already started. In recent weeks, Microsoft has signaled plans to close or sell some studios, including Ninja Theory, maker of the acclaimed “Hellblade” series.
Shedding staff, studios and marketing will lift Xbox’s profit margins in the near term. What it won’t do is fix the underlying problem: a business can trim its way to a better number only so much before it has to generate more revenue.
Sharma’s plan, so far, is to concentrate on Xbox’s biggest franchises, funding blockbusters like Halo and Fallout while pulling back elsewhere. It’s leaning on Game Pass and releasing most of its games on PCs and rival consoles from Sony and Nintendo, reaching players well beyond Xbox’s shrinking base, even as it holds back a few new exclusives like Gears of War to give owners a reason to stay.
Microsoft is also rethinking the console itself. In her memo, Sharma described a “hardware component crisis” that has left the company unable to make as many consoles as players want, and called for “a new business model and partnerships” for its hardware.
How far the reset ultimately goes is an open question. The Informationreported that Microsoft has weighed making Xbox a standalone subsidiary, a joint venture, or a spin-off, though nothing is imminent.
Microsoft’s response to the Xbox 360 “red ring of death,” July 6, 2007. (Seattle Post-Intelligencer / NewsBank)
Whatever happens next, it’s clear that times have changed. In 2007, as the red ring of death crisis emerged, Peter Moore, who ran the Xbox business at the time, and his boss Robbie Bach went to then-CEO Steve Ballmer to ask for the money to repair and replace the failing consoles.
Told it was $1.15 billion, Ballmer said, simply: “Do it.”
Moore credits that decision with saving Xbox. There would have been no Xbox One, he said, without Ballmer’s willingness to spend more than a billion dollars to protect the brand.
Nearly two decades later, Microsoft is done writing that kind of check.
Sony has just announced on their PlayStation blog that they will stop the production of game discs starting January 2028. This effectively means a shift away from physical media to one that fully relies on downloading content from the PlayStation online store.
Although not technically confirmed, this announcement would strongly indicate that the PlayStation 6 will do away with its optical drive altogether as previously speculated. Of course, physical media has long since been on the ropes, particularly when it comes to gaming. Valve’s recently released Steam Machine doesn’t feature an optical drive, and for that matter, neither does the average gaming PC these days. But it’s still disappointing to see in many ways.
Although digital downloads have their advantages, a major problem here is that due to Digital Rights Management (DRM) you only ever get a license to lease a game. This means losing the ability to lend or borrow a game, and will likely mark the end of second hand sales. With narrow exceptions such as Good Old Games (GoG) and its DRM-free installers that you can e.g. burn onto a CD or copy to a USB drive as a static instance of the software, this shift by Sony effectively ends game ownership for PlayStation owners.
Sony announced on Wednesday morning that it plans to phase out physical media for future PlayStation games, which is a massive market disruption for an already reeling games industry. It ends trade-ins and lending, raises the overall price of entry for the PlayStation ecosystem, and turns your shelf full of games into licenses that can potentially disappear.
The news came via a post on the official PlayStation blog by senior communications director Sid Shuman. As of January 2028, all games for PlayStation platforms will only be available in digital formats, such as direct downloads.
“This is a natural direction for Sony Interactive Entertainment to adapt to consumer trends as the general preference for digital media significantly outpaces physical discs,” Shuman writes. “This transition will enable us to align more closely with how most of our community prefers to access and play games today.”
Analysts have expected an announcement like this for some time. As per Circana senior director Mat Piscatella, physical media sales in gaming have been on a steady downward turn since their peak in 2009, hitting an all-time low in 2025. In fact, several companies have sprung up since then that treat physical games as an exclusive collectible, such as Limited Run, Lost in Cult, and Videogames New York.
US new physical video game software spending. 12 months ending May 2007-2026:
It’s not hard to see why Sony would make this move. We’re approaching the point that would usually mark the end of the PlayStation 5’s life cycle. Were it not for the ongoing component shortage, we’d likely have heard more about the PlayStation 6 by now. An all-digital PS6 theoretically uses fewer parts and the games are cheaper to publish, which lowers the per-unit cost for Sony as it develops the new hardware.
However, Sony’s decision to sunset physical media in a year-and-a-half is faster than most analysts’ craziest predictions, most of whom figured it’d take at least another decade to fully phase discs out. Even at its lowest point, per Circana’s math, physical media in video games represents $1.9 billion in consumer sales. That’s not insignificant.
Sony’s competitors have yet to react in any significant way. Microsoft’s next-generation Xbox, currently known under the codename Project Helix, is rumored to be an all-digital system, and Microsoft has famously been trying to get out of the physical media business since at least 2013.
That year, Microsoft announced at E3 that the Xbox One would have significant measures in place to keep players from reselling their physical games, which led to widespread outcry online. The next day, Sony’s president went onstage and proclaimed the PS4 would do none of that — which gave it a big head of steam going into a console generation Sony went on to win.
Thirteen years later, Sony is making Microsoft’s old bet.
The irony is that Sony itself underscored one of the biggest issues with ditching physical media last Sunday. On June 26, Sony sent a number of users in the United Kingdom an email to notify them that due to the end of a license agreement, 551 shows and movies that were previously available on the PlayStation Network would be removed from the service. Consumers who’d previously thought they’d made a purchase were suddenly informed that it had actually been a multi-year rental.
That’s the central problem of the streaming era for end users: you only have anything in your digital library for as long as the library’s owner decides you do. An all-digital future means you own nothing. At best, you have limited viewership rights that can be revoked at short notice.
Most worryingly, however, the shift to an all-digital future effectively raises the cost of entry to the console market, at a point when the price of gaming is already rising. If there are no physical discs for the PlayStation 6, then you can’t swap discs with a buddy or defray a purchase by trading an old game back to a store.
This is a relatively sudden disruption to the console market, and through it, to the games industry as a whole. It’s likely to have a series of knock-on effects for the next few years, and sets an early tone for the upcoming 10th generation of console hardware.
While it’s still possible that consumer outcry could get Sony to reverse course here, or offer some intermediary solution like USB disc drives, the end of physical gaming media has analysts and players alike asking a lot of tough questions about costs, preservation, and consumer convenience. The games industry is changing faster than expected in 2026, and is likely to be nearly unrecognizable by this time next year.
Sony has announced that it will end support for disk-based games from January 2008. From that point, no new games will be released in a physical format for the PS5 or a potential PS6 console.
Some gamers are concerned about the future of game ownership after Sony's announcement today that it won’t produce physical discs for PlayStation games as of January 2028. On that date, “new games will be available on PlayStation Store and at retailers in digital formats only,” Sony said in a blog post.
Ditching discs is “a natural direction” for Sony “to adapt to consumer trends as the general preference for digital media significantly outpaces physical discs," the post said.
During Sony’s fiscal year ending on March 31, 2026, digital downloads accounted for 78 percent of full-game unit purchases, up from 76 percent in fiscal 2024.
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