There is a lot of debate currently over if the next generation of hardware from Sony (and maybe even Microsoft?) will support backwards compatibility.

In a word, yes, they most certainly will.  As I am favorable to the Sony line of video game consoles, I am obviously more educated on their practices and the user experience I have with them, not to mention the long-term investment of my gaming collection in the PlayStation brand.

But, “in what form?” is the question that should be asked about backwards compatibility — not whether or not it will be around… Backwards compatibility comes in two fashions, looking forward:

1. Disc-based (hardware) backwards compatibility.
2. Software (storefront/online/digital) backwards compatibility.

Disc-based BC is less appealing to Sony as they can’t continue to make profits off discs after the fact, besides downloadable content, and that, at best, is probably not as profitable as we might think for most games.

By making consumers’ libraries of disc-based libraries incompatible with a potential PlayStation 4, it has the following potential benefits for Sony:

1a. Consumers will repurchase games they have.

This is obviously very attractive to all the businesses involved. The repurchasing of games that are “re-mastered” via disc, and also “re-mastered” (aka “made compatible”) with the current generation of hardware. People get to rebuy the 30 dollar/50 dollar/60 dollar games they bought in the past for varying amounts of money and benefit from software BC, which is explored below.  This will also get them “new” sales from consumers who only bought games used to begin with.

1b. Consumers will “switch to Xbox” if their current libraries are cut off from them.

This is the counterweight to 1a. However, this is not the only option presented to gamers who are suddenly cut from their existing libraries. A portion of them will obviously become floaters, but they may also come back later in the generation when the hardware is cheap.

There are some that will undoubtedly choose the next Xbox (or Wii U?) as their “main console” for this reason alone, but whether or not Sony actually cares about this depends on how much focus grouping they can do and whether or not disc-based backwards compatibility actually IS a factor to keeping existing consumers who own a PlayStation 3.

I personally would assume that 1a > the losses from 1b in the long-run plus the costs of accommodating disc-based backwards compatibility (which may or may not include actual extra hardware in the box).

The result and purpose of the loss of disc-based backwards compatibility is decreasing/eliminating the confidence in optical media severely due to its resulting loss of one of its greatest benefits — longevity of ownership (aka the selling of games back as used games and resold to a new consumer), and giving more confidence to online media.

Now, exploring online-only backwards compatibility, we can almost be 100% sure that anything bought online will be made to work with whatever future PlayStation 4 is available, whether they have to update all the games with a new build or software-based solution. The benefits that come from this are (assuming all the points I brought up above are true):

2a. Customers repurchasing games online — aka “more control.”

Customers “rebuy” games that cost little to nothing to create and service. Not to mention they are cutting out the middle man — the retail store. Sony and the 3rd party get a second income from this and at a greater rate due to less hands in the pot.  This also obviously eliminates used games.  You can’t sell a used digital game.  That makes no sense!

2b. Confidence increasing in Online purchases vs. Retail Purchases

Customers will be less apt to buy disc-based games at a retail store due to the fact that their disc may or may not be backwards compatible in the future. This probably only affects about 30 to 50% of the gaming community that actually enjoys playing old games on a new system. I’m sure that most of the people who buy games sell all of the games they buy once they’re done playing them.

The result of supporting Software BC is BENEFICIAL for the following reasons:

1. Boost confidence in online purchases, which leads to:

• 1a. elimination of retail new games

• 1b. elimination of used game sales

2. More long-term profits by having an increasingly larger selection of games available online at a more favorable cost to profit ratio.  There is never a “lack” of games to buy and play, even when a new console is launched.

The most clean example of what is happening is the transition from PSP -> PSVita.  People are buying PSP games to play on their PSVita, and all of the UMD games that consumers may have bought have become unusable on the new system, yet everything that was available/purchased online works on PSVita for the most part or will be patched to be able to.  Anyone who has a UMD game that they want to play on the PSVita will have to repurchase it, no exceptions.

We all know video games are going to online distribution systems exclusively within the next 10 years. Sony’s 10 year plans include outlooks like this, I’m sure.  PS4, coming out in 2014, sticking around until at least 2024 as an actively-developed-for platform. I’m sure every single game that is ever released on the PS4 will be mandated to be released online as well.  If it gets to the point of games being streamed from some server somewhere, you won’t even have a copy of the data you buy anymore. Poopoo on us if those servers go down one day, or the rights to stream those games disappear and you no longer have the right to that software once it happens, even if you did pay for it.

The super long-term plan for Sony is to eliminate disc-based backwards compatibility.  It is simply unfavorable to the industry as a whole to keep it around. It is a wholly consumer-positive practice and during this transitional period we are making into Online-only purchases (and soon cloud gaming) there will be growing pains for consumers who think they own something when they buy it.

The loss of disc-based/hardware backwards compatibility is bad for the consumer.  To promote or not care for the loss of disc-based backwards compatibility is to be anti-consumer.