To the dev/publisher/console storefront operator, a used game sale without a DLC attachment is the same as a pirated copy. Same result: you play zelda, nintendo receives $0.
Killing the used market is why Sony’s killing discs, full stop. Sony (or anyone else) doesn’t make the full value off of a disc game because they had to pay a bunch of manufacturers and shippers and middlemen. So if a digital copy makes them $60, a physical one new makes them let’s say $35 of the customer’s $60. And a physical used one makes them $0, even though the customer paid $40. Don’t forget this also applies to third party games: Sony gets a cut of every digital sale and new disc sale, but $0 from every used sale. If a million used $40 games get sold, that’s Sony watching customers spend $40 million on Sony products without Sony getting a dime - even if we pretend that every used game buyer would be a non-buyer instead of willing to pay full price, Sony goes from getting $0 to getting $0 from those customers when they kill used games.
All Sony’s calculus has to say to make killing discs “worth it” is “some percentage of people that buy games physical (thus we get less of their $60 that they are provably willing to spend) and used (thus we get nothing from their $20-40) will now be buying digital copies”. That percentage does not need to be high.
Even Nintendo’s 38% (which refers exclusively to Nintendo games, not eshop exclusives and third parties that generate Nintendo revenue) is lower than it needs to be to ensure physical is the “right choice”. Every physical sale is a lower profit per sale for Nintendo, if they make 38% “sales” of a given game with 40% overhead (cartridges are way more expensive than blu-rays to manufacture and source), that means the physical copies actually represent 22% of a given game’s profit. And then you consider how many of those physical buyers would buy digital if the other option was “don’t buy Zelda”. That’s why Nintendo’s current strategy is to pass the non-savings on to the customer by pricing physical games higher than downloads.
Nintendo is intentionally misrepresenting the value of their physical market to one-up Sony. This is a company that argues in court that every download of TOTK from a pirate website is $60 that would have been spent on the game. Seems to me that they’d have a much easier time believing that every purchase of new TOTK from a GameStop is $60 that would have been spent on the eShop, and that some number of $40s spent on the used game would have bought it digitally if they couldn’t have the savings from a used cart.
Oh, I know, but I was calling out that the numbers they report downplay the significance of the physical game market.
Also, that doesn’t really tell the whole story. We don’t know how much people who buy physical still interact with digital goods. Nor do we know how removing digital may shift consumers elsewhere.
Assuming that by removing physical you’ll push a majority to buy your digital goods is an assumption, not a guarantee.
For example, I’ve moved away from consoles because if I’m going to buy it digitally, I might as well buy it for PC. That gives me greater control over how I play my games as well as more control over my games.
They don’t need to push “a majority” of current physical-preferring customers to digital, if the physical copy loses them 30% of the profit and 38% of sales for a game are physical, that means pushing half of new physical buyers over to digital and losing the other half of those customers entirely is slightly behind breaking even. That’s before assuming that a single dollar spent on used copies would have instead been spent on the eShop.
The only reason for Nintendo to not abandon these customers entirely is if they aren’t actually physical copy die-hards in the first place: they’re good little subscription paypiggies or totally fine with buying eShop exclusive games anyway. Their data currently leans in favor of tolerating the used market and lower margins on physical game sales. It will very likely shift, especially when it comes time to renew the agreements they’ve made with their manufacturing and shipping providers.
Nintendo’s doing what Sony did, testing the waters to see how many of their customers are willing to ditch physical for digital. They’re doing it by up-pricing physical first party games, while Sony did it by charging you an extra $100 (+33%) up front if you wanted to have the ability to play discs on your console. Sony is now acting on the customer data they have from their experiment, Nintendo will (as usual) be a generation behind. Right now, getting a physical copy for $60 vs a digital one for $60 is kind of a no brainer, unless you really don’t like swapping cartridges. As soon as customers start to ask themselves if having that cartridge is worth another $10, Nintendo will have the data they need.
To the dev/publisher/console storefront operator, a used game sale without a DLC attachment is the same as a pirated copy. Same result: you play zelda, nintendo receives $0.
Killing the used market is why Sony’s killing discs, full stop. Sony (or anyone else) doesn’t make the full value off of a disc game because they had to pay a bunch of manufacturers and shippers and middlemen. So if a digital copy makes them $60, a physical one new makes them let’s say $35 of the customer’s $60. And a physical used one makes them $0, even though the customer paid $40. Don’t forget this also applies to third party games: Sony gets a cut of every digital sale and new disc sale, but $0 from every used sale. If a million used $40 games get sold, that’s Sony watching customers spend $40 million on Sony products without Sony getting a dime - even if we pretend that every used game buyer would be a non-buyer instead of willing to pay full price, Sony goes from getting $0 to getting $0 from those customers when they kill used games.
All Sony’s calculus has to say to make killing discs “worth it” is “some percentage of people that buy games physical (thus we get less of their $60 that they are provably willing to spend) and used (thus we get nothing from their $20-40) will now be buying digital copies”. That percentage does not need to be high.
Even Nintendo’s 38% (which refers exclusively to Nintendo games, not eshop exclusives and third parties that generate Nintendo revenue) is lower than it needs to be to ensure physical is the “right choice”. Every physical sale is a lower profit per sale for Nintendo, if they make 38% “sales” of a given game with 40% overhead (cartridges are way more expensive than blu-rays to manufacture and source), that means the physical copies actually represent 22% of a given game’s profit. And then you consider how many of those physical buyers would buy digital if the other option was “don’t buy Zelda”. That’s why Nintendo’s current strategy is to pass the non-savings on to the customer by pricing physical games higher than downloads.
Nintendo is intentionally misrepresenting the value of their physical market to one-up Sony. This is a company that argues in court that every download of TOTK from a pirate website is $60 that would have been spent on the game. Seems to me that they’d have a much easier time believing that every purchase of new TOTK from a GameStop is $60 that would have been spent on the eShop, and that some number of $40s spent on the used game would have bought it digitally if they couldn’t have the savings from a used cart.
Oh, I know, but I was calling out that the numbers they report downplay the significance of the physical game market.
Also, that doesn’t really tell the whole story. We don’t know how much people who buy physical still interact with digital goods. Nor do we know how removing digital may shift consumers elsewhere.
Assuming that by removing physical you’ll push a majority to buy your digital goods is an assumption, not a guarantee.
For example, I’ve moved away from consoles because if I’m going to buy it digitally, I might as well buy it for PC. That gives me greater control over how I play my games as well as more control over my games.
They don’t need to push “a majority” of current physical-preferring customers to digital, if the physical copy loses them 30% of the profit and 38% of sales for a game are physical, that means pushing half of new physical buyers over to digital and losing the other half of those customers entirely is slightly behind breaking even. That’s before assuming that a single dollar spent on used copies would have instead been spent on the eShop.
The only reason for Nintendo to not abandon these customers entirely is if they aren’t actually physical copy die-hards in the first place: they’re good little subscription paypiggies or totally fine with buying eShop exclusive games anyway. Their data currently leans in favor of tolerating the used market and lower margins on physical game sales. It will very likely shift, especially when it comes time to renew the agreements they’ve made with their manufacturing and shipping providers.
Nintendo’s doing what Sony did, testing the waters to see how many of their customers are willing to ditch physical for digital. They’re doing it by up-pricing physical first party games, while Sony did it by charging you an extra $100 (+33%) up front if you wanted to have the ability to play discs on your console. Sony is now acting on the customer data they have from their experiment, Nintendo will (as usual) be a generation behind. Right now, getting a physical copy for $60 vs a digital one for $60 is kind of a no brainer, unless you really don’t like swapping cartridges. As soon as customers start to ask themselves if having that cartridge is worth another $10, Nintendo will have the data they need.