How digital is the video games market in 2024?

The vast majority of the games industry is digital. This has been the case for quite some time.

Overall, when we factor in downloads, microtransactions, DLC, subscription, PC, mobile, and so on, the physical games market represents a very small share of the video games business.

However, when we are talking about the sale of brand new video games, the physical business can actually prove to be an important way to distribute and sell video games.

Let's take 2023. Across Europe according to GSD (which tracks physical and digital sales), 72.4 million video games were sold via physical retailers. And if we just look at brand new games (so games released in 2023 only), we can see that 42% of all new games sold in 2023 were sold via physical stores. That's quite the market share.

But how has that changed in 2024?

Now, GSD's data is very good, but it isn't complete. It tracks physical retail sales for all major European countries, but it doesn't quite track every retailer and there are smaller European nations it doesn't track (such as Greece, for instance).

Also, while its digital data tracks sales from most major publishers (so Ubisoft, EA, Activision, Sega, Capcom, Microsoft, Sony, Plaion, Warner Bros etc…), it doesn't track the thousands of self-published titles, and it is missing a few publishers – the most significant being Nintendo. For this analysis, we've had to discount Nintendo first-party games from the report.

So when I say statements like '42% of games sold in 2023 were sold at boxed retail', I am mostly talking about AA and AAA video games (except for those made by Nintendo).

With those caveats in mind, back to the analysis.

For the first 40 weeks of 2024, we have seen a dramatic shift towards digital when it comes to new game sales. Across Europe, 75% of 'new games' (games released this year) have been sold as digital downloads (25% via physical retailers). That is a 12 percentage point shift over this time last year, when just 63% of games were sold via the likes of PSN, Xbox Live, Steam and eShop.

Please note: This data is just for the first 40 weeks of the year. The last quarter of the year is typically a little more 'physical friendly' due to gift giving around Christmas (plus retail events like Black Friday). That's why the first 40 weeks of last year was 63% digital, and that dropped to 58% by the time the year was over.

"Whether a game developer or publisher should consider a physical release will largely depend on the game, the platform, the audience and the territory"

The shift is very much caused be increased digitisation on PlayStation. For the first 40 weeks of 2023, 41% of new PS5 games were sold via physical retail, but this year that's dropped to 32%. For the first time, new physical game sales on PlayStation have dropped to under a third of the market.

We've also seen increased digitisation on Xbox. Xbox has always been the most digital of consoles, and this year just 19% of new Xbox Series S and X games were sold via retail stores. In 2023, 26% of Xbox game sales were physical.

Things differ with Nintendo Switch. Now, I must stress that we are missing a lot of Switch data because Nintendo doesn't share first-party digital sales with GSD. That means this is purely based on third-party game sales, which isn't a huge component of the Nintendo Switch software market.

On Switch, 65% of new third-party games sold on the platform (across Europe for the first 40 weeks of the year) were sold physically. That's right, Switch remains a predominantly physical platform for this end of the market. For the same period last year, 67% of Switch sales were physical. So there has been a slight shift there, but not a significant one.

So what is causing this dramatic shift in 2024 towards digital, particularly on PlayStation and Xbox?

Well, the shift might not be quite as significant as it first looks. The digital/physical split for new games can vary greatly from title to title. If you look at recent multiplayer shooters, for instance, you can see that upwards of 90% of games sold are via digital stores. But look at a game like Astro Bot on PS5, and actually that game has (so far) mostly been sold via physical retailers. In other words, how digital a year is or isn't depends heavily on the release schedule.

2023 was a blockbuster year for new video games, and it was headlined by Hogwarts Legacy. The game set in the Harry Potter universe was a big mainstream release that appealed broadly, and these games typically do better physically than more hardcore releases. And indeed, that was the case for Hogwarts Legacy. The Warner Bros game was also very popular on Nintendo Switch which, as we've established, is a predominantly physical platform. By contrast, we've not had a very big third-party Switch game this year (the biggest two have been EA Sports FC 25 and Prince of Persia: The Lost Crown).

It wasn't just Hogwarts. Single-player, narrative games also often do better physically than multiplayer titles, and we had a few of those in 2023, such as Star Wars Jedi: Survivor and the Resident Evil 4 remake. So last year's release slate was quite physical friendly.

By contrast, 2024 hasn't had those games. The biggest new releases have been things like Helldivers 2 and Warhammer 40,000: Space Marine 2, which lean more digitally.

"With 32 million physical games sold across Europe for the first nine months of the year, the boxed games market remains a viable opportunity for games companies everywhere"

Upon saying that, there has been some natural movement towards digital sales, and the way we can conclude that is by looking at annual releases. Specially, sports games.

Looking at sports titles such as EA Sports FC 25, NBA 2K25, F1 2024 and WWE 2K24, we can see some increased digitisation. For some games, it's a 1% to 2% digital increase, whereas for others it's around 5%. So there has been an increased shift towards digital, but not quite the numbers we were reporting further up in the article.

In conclusion, whether a game developer or publisher should consider a physical release will largely depend on the game, the platform, the audience and the territory. Are you making a AAA action platformer for Switch? You ought to be looking at a physical title. Is it a single-player survival horror for PlayStation? Physical might be worth considering. A multiplayer shooter for Xbox and PC? Maybe not.

And with 32 million physical games sold across Europe for the first nine months of the year, the boxed games market remains a viable opportunity for games companies everywhere.