Key Takeaways
1. Analysts warn that tariffs imposed by the Trump administration may lead to a decline in the production of physical game discs, pushing publishers towards digital-only models.
2. A 25% tariff on imports from Mexico is expected to reduce the availability of physical game discs in the US and potentially raise prices for both physical and digital versions.
3. The production of game discs is heavily reliant on Mexico, with significant implications for the gaming industry due to the tariffs.
4. A 20% tariff on consoles imported from China may lead to rising prices, although current inventory may keep prices stable for now.
5. Spending on physical video game software in the US has been declining since 2021, adding to the challenges faced by physical game production.
Analysts have raised concerns that the tariffs recently imposed by the Trump administration may negatively affect the production of physical game discs. This change might lead publishers and developers to abandon physical copies altogether. The tariffs, which took effect on March 4, target Canada, Mexico, and China, with Mexico being highlighted as the primary producer of these game discs.
Impact on Game Production
Circana analyst Mat Piscatella mentioned on the social media platform Bluesky that while video games represent a tiny fraction of the overall turmoil caused by the Trump tariffs, it wouldn’t be surprising if physical games “just don’t get made” anymore. He suggested that many publishers may lean towards a digital-only model and stop offering physical versions of their games altogether.
Decline in Discs and Rising Prices
In January, Piscatella pointed out that a significant portion of physical game disc production takes place in Mexico. With the introduction of a 25% tariff on imports from Mexico to the US, a decrease in the number of disc-based games entering the US market is anticipated. For those games that still offer discs, prices are expected to rise, even for digital editions, to keep price equality. Additionally, while production could shift to the US, it would necessitate considerable investment. However, spending on physical video game software in the US has been declining since 2021.
Hardware Consequences
A similar situation is expected for hardware, as around 75% of all consoles sold in the US are imported from China. With a 20% tariff now in place, prices may rise in the future. For now, PC hardware and consoles will likely keep their current prices until the existing inventory from before the tariffs is sold out. Interestingly, in February, Newegg reportedly cited the tariffs as a reason for the increase in prices of Nvidia GeForce RTX 5080 and RTX 5090 GPUs in a post on X, although those posts have since been removed.
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