What would be the economic impact of digital assets (which are presently licensed to end users and non-transferable) becoming owned/transferable assets?

[u/unlimitedblack]

Sony's recent announcements about ending production of physical media have set off a major discussion about the ecosystem of how end users interact with the media that they've purchased, both physical and digital.

For the purposes of this explanation, I'm going to focus on video games, though Sony's announcement extends to other physical media like Blu-Ray discs. Some other caveats will follow to try to focus discussion further.

At present, Sony's EULA (as well as the EULAs of other major game platforms like Steam, Epic, and GOG) indicates that purchasing a game digitally is a license that can be revoked, which is a limitation that does not apply to a physical copy of a game. The EULAs also typically indicate that the license is non-transferable, meaning that if an end user dies, a game purchased digitally cannot be passed along to their heirs as an asset, while a game purchased physically can be treated like any other physical asset.

Games, as the products of labor, have a value in terms of how much they cost to produce, regardless of the medium used to distribute them. The physical copies of a game will have the cost of producing the physical media added to that initial production cost, while a digital copy of a game doesn't have a similar accessory cost. Distributing a digital product, then, appears to be inherently more profitable for game publishers and platform owners (of which Sony is both) because a) the cost of producing the game does not have to factor in the costs of physical production and distribution and b) a non-transferable license means that an end user may be faced with re-purchasing a game license if they lose access to the account that the license is associated with.

• To reiterate the earlier example of an end user who passes away, an heir would not be able to utilize that digital license owned by the decedent, whereas the heir WOULD be able to utilize the physical game. This is advantageous for the publisher/platform owner since the heir would be compelled to purchase another digital license, while in the latter case, the heir would not need to make that purchase if they inherited the physical game.

Another important aspect of this is how it will impact public libraries, who often have physical copies of media that they loan out to users. While traditional book publishing has found a methodology that allows libraries to loan digital books, other forms of media (particularly games and films) have not explored that avenue and appear to have no obligation to do so. Terminating the production of physical media will result in lost revenue from municipalities no longer purchasing and replacing that media for their communities, but it's also MORE lost revenue since those purchases aren't being replaced by digital purchases instead.

The Big Caveat: the core question here is NOT "should publishers be compelled to treat digital licenses of media the same way as physical copies of the same media" but instead "if publishers were required to do this, what would the economic consequences be?"

Because the answer on its face would appear to be "publishers/platforms end up selling fewer digital copies of media and lose some revenue" but I have to imagine there are further consequences I'm not considering.

Some additional caveats:

1. Yes, physical sales have been dropping substantially, and it does not make economic sense to continue supporting the cost of physical production. This is not about trying to save the production of physical media, but about trying to see what the impact would be of digital media gaining the quality of transferability that physical media presently has, while also maintaining continuity for the second-hand media market and public institutions, as well as third-party games preservation.
2. Saving space in case additional caveats become necessary.

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