The days of buying physical video games may be numbered. According to Circana analyst Mat Piscatella, physical game sales in 2024 were less than half of what they were in 2021, and the market has been in decline since 2008. This trend is expected to continue, with major console makers like Microsoft and Sony signaling a shift towards digital distribution.

The writing has been on the wall since 2020, when Microsoft and Sony introduced their next-generation consoles with digital-only options. The primary reason for this shift is connectivity, with about 99% of consoles now connected to the internet. As a result, gamers are opting for the convenience of digital games over physical copies. Piscatella notes that "more and more often people would choose convenience over the practical positives of physical."

Microsoft, in particular, has been vocal about its interest in a heavily digital future. The company's Xbox Game Pass subscription service is essentially a rental service for digital titles, and its "This is an Xbox" campaign positions any device with a screen as a potential console. The latest Xbox generation launched with an all-digital Series S, and it added an all-digital Series X option last year. Physical editions of Microsoft's biggest Xbox games, like Avowed, only contain a code for the game in the box.

Sony, on the other hand, is expected to take a little longer to make the all-digital jump. While the company is signaling a move towards digital distribution, it still sells drives separately for the PS5 Pro and slim PS5. Additionally, Sony faces pushback from its large user base, which has invested heavily in physical games. Piscatella points out that some major mass-market games like EA Sports College Football and Call of Duty have a "pretty big physical presence" that console makers may not want to jeopardize.

Nintendo, however, is where we see the argument for physical games sticking around. The just-announced Switch 2 has a cartridge slot and is backward-compatible with Switch 1 games. The company's audience, especially families, expects the format, and it's easier for kids to share games when they can just pass the cartridge to each other. Piscatella notes that Nintendo platforms are still "heavier physical" than other platforms, but this advantage won't last forever.

Even Nintendo is signaling a shift towards digital distribution, with its recent announcement of a "virtual game card" lending system that lets family members share digital games. As Piscatella puts it, "consumers on PlayStation and Xbox are speaking with their dollars that digital-first is a fine way to go."

While physical media sales are on the decline, New York University games professor Joost van Dreunen points out that the sales of physical video game accessories have been "skyrocketing." The PC games market may be mostly digital on Steam, but sales of things like custom controllers, screens, chairs, and headphones are a "huge category." Van Dreunen believes that accessories and what he calls "the personalization of the physical experience of games and interactivity" will grow, which we can see manifested all the way to theme parks.

Both van Dreunen and Piscatella compare the decline of physical video games to the resurgence of vinyl records, which is "kind of like on the extreme niche, but doing ok." There's a key difference between vinyl and video games, of course – with a vinyl record, you can play it on a turntable, but a physical cart of Super Mario Odyssey can only slot into a Nintendo Switch. It's more about the enthusiast crowd focusing on physical media.

Maybe that will be enough to keep physical formats around into the future. But as the industry continues to shift towards digital distribution, it's clear that the era of physical video games may be coming to an end.