Did PlayStation just Blink on Physical Game Demise?
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Double Dipping
On the latest Sony Earnings and Investors call this past week, that covered Qtr1 ending June 2026, CEO Lin Tao walked through the results on a webcast as always. The numbers reflected another solid start to Sony’s Business Sectors, including Semiconductor, which was recently impacted by the Japan Earthquake earlier this week in Kumamoto. But most eyes will still be on their PlayStation business is the single biggest they have, and the presentation offered some good insights into their plans. As I discussed early in July this year with Moore’sLawIsDead on his YouTube Channel below, the killing of Physical Disc’s is still the big talking point in the game sphere. So much so, that they were questioned twice on the investor call, reflecting how the announcement has far reaching concerns outside of just those of us that buy and play the games. In that video I mentioned that Sony WILL NOT yield anything from the announcement, in the short to medium term, as this would have been a long thought decision. They would have expected the pushback to be high, but also that they are able to swallow some loss short term for a much better long term view on their business forecast and profitability future. Simply because they can reduce overhead and speculative cost in the supply and manufacture pipeline, but also reduce the supply chain by making all sales digital thus shortening the time from “Complete” to sold. And this is enhanced further by the guaranteed margins on ALL future PS5 and PS6 sales being contained within their walled garden, reducing the need to rely on 1st party titles for the biggest revenue stream. I said that they will hold off, have plans for repentance when needed and, when the time comes, asking for forgiveness is better than asking for permission. Check the video out below to listen to that discussion.
Addressing the Nation
What was very interesting in the video, was the questions on their disc business ending and how Lin responded below.
In regards to ending PS5(PS6+) physical disc manufacture in January 2028, we made this decision on a few factors. The biggest being, the continued digitalisation of content overall has been progressing. Not just for PlayStation but all kinds of content, and when we think about the future, and we put in a lot of thought and time. We cautiously thought about this and will continue to cautiously move forward with this decision. On this decision we have received various opinions, many strong views, and we understand that games are important to people, connected to people, loved and connected to fond memories. we understand that, and the digital future echo system, and we will work on how we engage with players is something we continue to explore.
Lin Tao – Sony Investors Call July 2026
Stack them Low, Sell them High
What is clear in the statement is Sony are aware and have acknowledged that the response has been negative for them. The full video is here but watch from 31 mins for the question and answer on Physical Discs. It was not discussed in the earnings report, but was once questions came in, two of them on this subject, they had to address it. And the reply backs up what I said with Tom on MLID, in that right now this is all part of the plan. Maybe a bigger concerted disquiet than they expected, maybe not, but certainly not enough for them to falter from the plan just yet. And the final statement, the holding statement “We continue to explore” is classic code for, plan B is still available not not needed as yet. I discussed with Tom what large corporations do at this level and never having a single plan is core to that. As he mentioned, returning to Disc production is one, and is still very much a choice they COULD make, but one I feel would need to see far greater impact on their margins, revenue, and investor relations to be considered now.
No, I believe, as I said then, part of the aim here is to consolidate the game sales business to ensure more controlled and managed revenue for all “Content” in their ecosystem and thus, factor in a level of subsidy that is 100% across all new PS6 hardware sold, and very importantly, supported further by the prolonged PS5 sales that will slowly transition to 100% digital by design when the new console (and associated handheld) launch. And this means they can offer a greater choice of cost to performance benefits that is only possible when this level of granular sales control is part of the business, just ask Valve. But unlike Valve, they can secure extensive shipments, bulk discounts and – most importantly in the architecture challenge – design and build a solution that can mitigate the cost and performance impact of rising storage and memory costs and artificial constraints.
As noted in their business results, pay close attention to the Hardware business and Bell Curve that all new hardware sales have. Just like the PS4 before it, the PS5 started well, grew to a height at year 3 and then has started to decline. This rise and fall is less than PS4, even though it had a slightly better 3rd year all others have been the same or worse. The PS5 quickly fell below the PS4 in its second year and never got ahead again. And, more worryingly for Sony, the PS5 has continued to fall further each year with this current Quarter being their worse yet, by some 50% behind the PS4. The hardware continuing to rise in price is certainly the biggest factor for this, but even before this happened it was not carrying the same velocity as its forbearer. As such, it is almost certainly not going to achieve the same heights of the last generation consoles impact and far below the PS2’s heady heights.
Making Eye Contact
The above comparison shows clearly the meaning of what I often say “Lies, Damned Lies, and Statistics” which came from British PM Benjamin Disraeli, but was made famous by American Writer, Mark Twain. The PS5 has been tracking just behind the PS4 really since Day 2 of sales, and the unit numbers only tell part of that picture. In so far as they are only now approaching 5+ million units behind after 5 full years on sale, 6 including launch to current. Meaningful but 95 Million units is hardly bad sales, however the ongoing trend paints a very different picture, one that the Finance teams in Sony will know very well. And that is of a downward trend, driven by market and supply constraints, but also Sony and PlayStation’s own actions. The worrying signs have come from last year when the price rises started to hit, and then early this year when they increased the price of all hardware more than ever. And this has been born out in the steepest decline yet, doubling the gap YoY between the 5th and 6th years, and then accelerating to 50% down in the current Qtr. At best this will remain as it is, but if it does it means like for like that 5 million deficit will more than double to 11 Million, and the trend means this is almost certainly a best case scenario. And this highlights a big reason for the decision and timeline.
Could.....you ju........ahem....maybe..... https://t.co/jvU1iA0i3M pic.twitter.com/3jgalIXvBY
— Michael T (@N_X_G) July 28, 2026
Sell Once, Sell Twice
It a shrinking attainable market, PlayStation has to adapt and by taking even greater control of its sales routes and margins means the smaller attach rate of games and hardware can be offset by a better yield on those that remain. And the second hand, 3rd party, logistics, licencing and more means those pennies fall into the coffers and the pounds start to take care of themselves. But also gives them the option to be more aggressive on those routes to market, to offer a cheaper (see Handheld) variant of the PS5xPS6 Hardware, but also the higher end PS6 target that will pay more. Both these models ensure profitability but also allow the current market to subsidise the gamble as that final 20% or more lost to the physical and 2nd hand market now becomes a growth factor in their forecasts.
The Holy Grail for an all physical future has long since been the aim for ALL content, music went first, then movies and TV shows, and now games make that shift into a Rent not Own transaction. But as we have seen, even by Sony themselves(See Above), that the past has a history of repeating itself. What was once a standard physical world only buying records, cassettes, or CDs. Watching films at the flicks then later renting on Betamax/VHS tapes before moving into owning them from Woolworths, Boots, HMV, Virgin and co. Slowly became car boot DVD or Blu-Ray pick-up, Charity shop purchases, or a bulk buy in CEX. Even those who never experienced this themselves first hand back in the 70s-early 2000s, have now started to long for the physical touch. With Vinyl and cassettes growing in the past few years, retro game sales being higher than ever, and even new old consoles and games launching each year. No, Sony and PlayStation have certainly not blinked yet, far from it, but they have at least engaged eye contact with us, and its single biggest audience.
