They're doing this because microlenses will make them more money than physical discs and they want to repurpose their biggest disc facility to do those instead of spending billions on a new facility. Apparently they had this planned since 2024 so I don't think they're going to backtrack this decision. Could part of the reason is because they're doing a PS6 console and handheld and so the only way to play your PS6 games on the handheld (and console) you need to buy digitally? Sure I can partly see that, but we're seeing rumors of Microsoft trying to have your physical discs act as the DRM for conversion to digital rights for that game which will be tied to your account until the disc is used with another account to convert the license. Sony could do this as well, but they obviously either don't want to or didn't have the foresight to do this.

I have access to an og PS5DE and it isn't compatible with the disk drive. It's entirely on the buyer if they buy the handheld without knowing it's digital only lol.

Microsoft didn't stop physical games because of Series S. Also, Sony has not even announced the handheld yet. It's probably happening but not official yet.

Question: How would getting rid of the resale market (via killing physical) lead to a decrease in software prices? The whole point in doing sales is to directly compete with the low prices offered on eBay and FB Marketplace. Not to mention Sony can revoke your access to all games if you violate ToS (e.g. as a consequence of 36 months(?) of PSN inactivity… which to be clear isn’t a term decided upon by an ill-willed company looking to scam consumers but of EU regulatory law,… but the point still stands that having games tied to seemingly arbitrary ToS is not in consumer’s best interest).

Excuses excuses excuses!
Sony wants monopoly(and third parties)
They want to increase game prices(mark my words ps6 games be 90- 100 dollars)
They want to have less meaningfull sale's
They want 100% of the money
They want to take away your game whenever they please( ow boy this is 100% going to happen to many games)
They want nobody to buy second hand games
They want NO compition with games also being physical.
FUCK the gamers they are milking cows is what sony thinks.

If the handheld comes with a dock, the dock could be made so the separate disc drive add on mounts to it somehow. The dock always has to be plugged into the internet. If you're gaming on the go, you use a digital copy with a temp license to play. SNY will check to see your dock and check to see how long ago you played the game. If too much time has passed since the game disc was loaded in the dock, it won't let you play the game digitally. 7 days? 14 days? 30 days? 60 days? I dunno.

This would be a minor headache, but should work. Perhaps SNY could solve that by offering a longer check in period perk if you're a PS Plus Premium subscriber? 90 days? I dunno.

The other way to solve physical for the handheld is offer game carts. Also have a game cart slot in the PS6 so someone with both doesn't need to buy a game cart and digital. Game cart will work on both systems. This way you can buy a digital or physical copy that works for both,

While people are having a heart attack over digital games, I find it odd that no one ever stopped to think about why physical may actually be an issue in the near future. I mean after all for a game like GTA, selling only digital will prevent multiple purchases for a lot of folks... 

The obvious issue with Sony doing physical after 2027 is the PS6 handheld. Im kinda surprised that no one has brought this up before.  

Now this issue won't be a same kind of problem for Xbox because their disc contain unique DRM IDs. PS discs do not so a disc to digital program would be harder to pull off.

Also, Sony states that Code in Box will be at retailers. This solves the predictable issue of a casual buying a PS6 game in a store and then realizing their handheld doesn't have a disc drive.  It also creates a competitive landscape for digital pricing.  This is a win for those of us that are already primarily digital. 

I see the value in physical media but knowing that the handheld is coming, I would prefer the digital format if I can't use the disc on this device in the future.  For the PS5 in this present day this issue isn't really a thing because even if you buy a disc and only have a digital console, you have the option to add a drive.  Clearly Sony had to be thinking about this.

Can anyone think of a possible solution that enables disc play in handheld mode that doesn't create a tsunami of confusion for the consumer?  

Responses:
Sony wants monopoly(and third parties)  A monopoly of what?
They want to increase game prices(mark my words ps6 games be 90- 100 dollars) They got to catch up to Nintendo and Rockstar first
They want to have less meaningfull sale's This is utter BS. Companies have sales to move stock that isn't moving.  They rather get a smaller cut than no sale.
They want 100% of the money I'm sure they do want 100% of the money like every company, but if they return to selling digital at retailers, the store will get a cut.
They want to take away your game whenever they please( ow boy this is 100% going to happen to many games) Why would they want to do this?
They want nobody to buy second hand games Agreed, because they are cut of of the sale. 
They want NO compition with games also being physical. I'm sure they do prefer digital sales for sure.  I'm not sure what you mean by competition though.
FUCK the gamers they are milking cows is what sony thinks. You are a drama queen.  These people aren't cartoonishly evil like you suggest.  Its standard fair for how corporations operate which is another subject in and of itself.