I pre-ordered Resident Evil Requiem for PlayStation 5 back in January. As of March 19th—21 days after the game’s February 27th release—Amazon gives me an estimated delivery date somewhere between March 30th and May 30th. Many would simply cancel their preorder and buy the game at a retailer like Best Buy or GameStop. However, few retailers can keep them in stock; calls to nearby GameStops in both my native Bay Area and Los Angeles showed that nobody had a physical copy
Resident Evil isn’t the only game facing printing shortages. The surprise hit Pokemon Pokopia was so hard to find that Amazon raised its price to $80 USD. Copies of Square Enix’s Dragon Quest VII Reimagined were also scarce around release, leading many to simply buy the game digitally.
So what’s going on? Are these games so popular that physical copies are flying off the shelves? Is some combination of tariffs, a war in Iran, and heightened hardware costs for AI research impacting game production?
It turns out the answer might be more nefarious than we imagined.
Artificial Scarcity: Publishers Don’t Care What Customers Want
Surveys show customers have a strong preference for physical copies. Many even remember the Xbox One launch, which was mired in controversy over physical game limitations and the outright blocking of used games. Despite an obvious preference for physical media, publishers have endless incentives to migrate consumer habits toward digital distribution.
Let’s start with the most obvious one: printing discs, creating boxes, and shipping them all cost money. Additionally, the retailer wants a cut of that sale, so the very nature of a physical copy costs the publisher more of their share.
Before I break down physical versus digital sales, note that industry estimates build much of this data. Publishers closely guard the actual figures. With that out of the way, let’s examine the difference in profit.
For physical copies, the materials used to create the game amount to roughly $3.50 (5% of a $70 USD game). Of the remaining cut, the retailer takes about $21 (30%), and the platform license (Xbox, PlayStation, Switch, etc.) costs about $10.50 (15%). This leaves the publisher with about $35 from every sale. That share then needs to be split between the developer and any middleware tools like Unreal Engine. At the end of the day, the actual dev team may see as little as $4–$5 per copy sold.
Digital sales are much simpler, though they carry high platform fees. Platform holders like Steam, PSN, or Google Play typically take $21 from a digital sale (30%). The rest goes directly to the publisher to be split between devs and middleware. This creates a roughly 20% profit difference between the two systems. The actual game dev may see $7–$9 per copy sold digitally.
This 20% margin is the most obvious benefit to the publisher; it becomes massive when scaled by millions of units. Everyone involved in creating the game benefits more when they sell digitally.
Digital Means Retention
While making more money seems like the only reason publishers push digital, secondary benefits are equally important to long-term strategy. I mentioned the disastrous Xbox One strategy earlier, and in the “End of the Console War” post a few days ago, we detailed Microsoft’s strategy.
In the late 2000s, Microsoft attempted to launch Games for Windows Live to mimic the success of Xbox Live. They discovered a problem: Steam had already become entrenched in gamers’ lives. Microsoft assumed gamers were hesitant to switch platforms due to their large digital libraries. Steam had a seven-year headstart, and gamers had amassed massive backlogs, not to mention community features like friends and achievements that kept them on the platform. Every publisher who has attempted to build a PC storefront, from EA to Epic, has reached the same conclusion: PC gamers are glued to Steam.
Based on these learnings, and with the Xbox One and PS4 offering larger hard drives and robust infrastructure, Microsoft figured the console that built the largest digital library would win. The aggressive digital-first strategy was meant to retain players within the Xbox ecosystem where they didn’t have to worry about Steam. It was a solid strategy, if not for those pesky players who absolutely hated the idea of a digital-first console.
Digital Games Cut Out the Middleman
Another publisher-friendly benefit is the inability to sell or trade digital games. This has been an interesting puzzle; while main console manufacturers have introduced ways to loan digital games, none have built a secondary market for digital licenses.
The reason is simple: everyone in the industry loses when someone buys a used game. No new profit is generated, and 100% of the money goes to the seller. Publishers spent the better part of the 2000s trying to worm their way out of used game sales, even cutting off core components like online play if a game was bought second-hand.
Are Publishers Hiding Physical Games on Purpose?
None of them will say it out loud. But let’s call it a happy coincidence for an industry struggling to stay afloat. While gas prices impact distribution costs, the actual printing of discs isn’t deeply affected by world events.
A more pressing matter incentivizing digital conversion is the recent litigation between Epic Games and Google/Apple. Epic has challenged the right of digital storefronts to retain 30% of sales when the platform owner is essentially a monopoly. Courts have so far ruled in favor of Epic Games, and the industry waits with bated breath for the ramifications of these rulings.
Digital Only: Probably Inevitable
Ultimately, we are likely in the waning days of physical media. This same pattern played out in film and music, and physical CDs or Blu-rays have become rare in modern collections. Furthermore, the actual content on a game disc is becoming irrelevant. Many games are too large for a single Blu-ray, requiring a massive download just to be playable. Discs are now basically just a form of authentication.
Nintendo has even codified this with their much-maligned “game key cards”—empty boxes that simply enable a download. As much as we laugh at those, at least players can still sell or trade a key card.
There is also the bleakest future: one where platform holders simply stop offering downloads of games you’ve already bought. This happens when platforms shut down or licenses expire. We’ve seen it countless times on Steam. In fact, in perhaps the biggest mass culling of software ever, an Apple security update caused the removal of hundreds of thousands of apps. Since many of those developers have shuttered, nobody is left to relaunch or preserve them, meaning hundreds of thousands of games are lost forever.
That being said, we are now seeing acknowledgement of the importance of digital preservation. The consumer movement “Stop Killing Games” sprung up as a response to this new digital world. While piracy exists in a moral and legal gray area, it has been instrumental in preserving software that would otherwise vanish.
