What the Death of Physical Video Games Means for Consumers

**Kusha Navadar** (0:10)
It's The Brian Lehrer Show, I'm Kusha Navadar filling in for Brian today here on WNYC.
Now let's turn to video games and digital ownership. The video game industry is bigger than the global film box office and recorded music industries combined, generating hundreds of billions of dollars in annual revenue. And yes, that's billions with a B.
So today we're going to focus on how the gaming industry has been transitioning away from physical game sales and towards digital sales. Sony, who makes the PlayStation and publishes many games, recently announced that they're phasing out physical discs entirely. By 2028, all PlayStation games will only be sold digitally. This might not seem like a huge deal, given that the majority of players already buy their games digitally. But the death of physical games actually tells us a lot about the direction that the gaming industry is moving in more broadly. And to sum it up, players are saying that they are paying more and getting less for games than they ever have. Jason Schreier is a reporter from Bloomberg News, who covers the video game industry, and he co-hosts the podcast Triple Click. Jason, hi, thanks for joining us.

**Jason Schreier** (1:26)
Hi, Kusha, thanks so much for having me.

**Kusha Navadar** (1:28)
So I first want to ask about the state of the video game industry more broadly. You've written about how over the past few years, it's transitioned from what you might call a growth market to a mature market. What does that mean exactly?

**Jason Schreier** (1:40)
Yeah, it's really interesting. I mean, the state of the video game market is fascinating to me because on one hand, video games themselves as a product and as an art form are better and more varied and more interesting and more emotionally resonant than they've ever been. But at the same time, actually working in the industry has become more challenging than it's ever been. And that is because the video game industry's kind of years of double digit growth have stalled. And we've seen a plateau that happened around. It's funny, there was a period in 2020 when the lockdowns were happening during the COVID pandemic, when everybody was staying at home and buying video games because they had nothing else to do. And there was this huge surge in growth at that point.

**Kusha Navadar** (2:28)
And Animal Crossing was my game just for the record. That was perfect timing.

**Jason Schreier** (2:33)
Oh man. So Animal Crossing came out in, I believe it was late March 2020 So just as we were all stuck in home, it was really perfect timing for them. And yeah, and so it led to the surge of growth for games. And a lot of companies over hired at that point, kind of had to hire to account for that growth. And I think there was some short sightedness, a thought that the growth would continue, that the success would always be there. And then it came crashing now when people went back outside. And there were other factors too, interest rates were a big part of it. A lot of kind of global macroeconomic factors that impacted all this. But long story short is that we haven't really seen the kind of surge in growth that we used to.
And there were other avenues of the games industry could use to find growth in the past, whether it was mobile games, which was a huge, huge driving growth factor in the 2010s, developing markets, and then a lot of bets that didn't pan out, like virtual reality. And so we're at this point now where a lot of companies have looked around and realized, hey, we are not seeing our audiences grow significantly, so we need to find ways to get more money out of our current audiences in order to maintain our year over year growth.

**Kusha Navadar** (3:45)
So how does that plateau change the behavior of these companies?

**Jason Schreier** (3:50)
Yeah, I mean, we're still seeing it in action. We're seeing a lot of them cutting costs. There have been tens of thousands of layoffs in the video game industry over the last few years. We've seen a lot of them trying to find ways to stabilize their revenue. There's been a big push in the video game industry for what game companies call games as a service, an offshoot of software as a service, where essentially, instead of just selling you a game, they want you to play a game and then keep playing it forever, and therefore, they get to generate revenue off of it. Instead of just selling it to you, they will put in what are called microtransactions, where they might allow you to buy your own outfits for the game or new weapons. There are a lot of these games that have become very popular, like Fortnite and Minecraft and Roblox to a certain degree.