Import tariffs may accelerate the death of physical video games

Tariffs on Mexican imports may end physical games, increasing digital releases.

: The proposed 25% tariff on Mexican imports threatens physical video game production. Daniel Sims highlights that most game discs sold in the U.S. are made in Mexico, a shift from previous domestic production. Tariffs on goods like these add to existing challenges from a 20% tariff on Chinese imports. This scenario may hasten the transition to digital-only releases with potential costs passed to consumers.

The impending 25% import tariffs on Mexican goods, delayed multiple times by former President Trump, pose a significant threat to the U.S. physical video game market. Unlike earlier times when game discs were manufactured in places like Indiana, the production has mostly moved to Mexico. Daniel Sims from TechSpot explains that this change could bring higher prices for these physical games if the tariffs take effect, potentially hastening a shift to digital-only formats.

Mat Piscatella of Circana and Daniel Ahmad from Niko Partners emphasize the crucial role Mexico plays in disc production, cautioning that such tariffs could lead to a strategic shift by publishers toward all-digital releases. Piscatella mentions the possibility of physical games subject to tariffs no longer being produced, referring to it as "a mess." Additionally, a 20% tariff on Chinese imports already raises hardware costs, further compounding these challenges.

The move to all-digital sales could have several implications. Although digital sales remove the need to produce physical discs, consumers may not see a price drop, as publishers often keep the difference as profit. Alan Wake 2's digital launch at a reduced price serves as a rare exception, with the console version offered at $59.99 versus the standard $69.99 for other games. Remedy's approach in pricing—lowering for digital and maintaining for physical editions—is unlikely to become a standard industry practice.

From an industry stance, redeploying disc manufacturing back to the U.S. represents a costly venture. Sims hints that this logistical and financial undertaking is unlikely amidst the ongoing decline in retail game sales. This trend further entrenches the industry's gradual migration away from physical media.

In summation, the introduction of these tariffs, alongside existing Chinese tariffs, presents a catalyst that may expedite the eventual obsolescence of physical video games. For consumers accustomed to trading and lending physical copies, this digital-first future might not be entirely welcome.

Sources: TechSpot, Mat Piscatella (@matpiscatella.bsky.social)

gamingconsole gamingSoftware