Microsoft is reportedly testing a new Xbox feature that could allow gamers to convert physical discs into digital entitlements, as the console industry edges closer to an all-digital future.

According to The Verge, Xbox employees have begun testing a ‘Disc2Digital’ feature that lets users insert a compatible Xbox disc into a console and receive a digital version tied to their Microsoft account.

The feature is expected to work with Xbox One and Xbox Series X discs, but not original Xbox or Xbox 360 games. Some Xbox One discs may also miss out, depending on how and when they were manufactured.

The move comes as Sony confirms it will stop producing physical PlayStation game discs from January 2028, raising questions about whether the next PlayStation and Xbox consoles will ship without disc drives.

Microsoft has not officially confirmed the feature, but references to ‘enable Disc2Digital’ were reportedly spotted in Xbox PC app code earlier this year.

Under the reported system, the digital licence would remain linked to the physical disc. That means if a player lends or sells the disc, the digital entitlement would move with it, preventing multiple accounts from keeping the same game.

The disc itself would still work after being digitised.

For Xbox users, the feature could be important if Microsoft’s next-generation console, currently codenamed Project Helix, launches without a built-in disc drive.

The digital version would reportedly behave much like a normal digital purchase. If the title supports Xbox Play Anywhere, it could be accessed on PCs and handhelds, while games available through Xbox Cloud Gaming could be streamed by Game Pass subscribers.

Multi-disc titles and console-bundled games are also expected to be supported, including downloadable content normally included with the disc.

The feature could soften the blow for collectors with large Xbox libraries, although it also signals that physical games are becoming less central to the console business.

Microsoft has yet to confirm whether Project Helix will include a disc drive, but the reported testing suggests Xbox is preparing for a future where physical media plays a much smaller role.

The news comes after a bruising week for Xbox, following more layoffs, studio uncertainty, console price rises and Asha Sharma’s broader reset of Microsoft’s gaming division.