tldr; it’s not worth the cost and headache to develop and support the functionality.
To break it down further:
1. As disc technologies developed data was packed smaller and tighter to fit more onto the discs. Each one requires different lasers with different resolutions built into the drives to read the data.
2. As consoles developed the code or language behind them changed. To read and understand the code from an earlier model requires translation (the emulator). It’s an oversimplification but you could compare it to if you only speak English and you want to talk to someone who only speaks Spanish you would need a translator of some kind in the middle to listen to one language, convert it to the other language, and back and forth. You need to find or build that translator (time and money), using it will consume resources (processing power, memory, heat), and it’s very easy for an ‘incomplete’ translation to occur (bugs, bugs, bugs).
3. Support and development costs now go up with each increase in complexity of the above two. There are more people you need to pay, more hardware you have to buy, you have more possible points of failure, more software to debug and a pile of ancient games you’re now stuck supporting long past their end of life, all for a dubious ‘value’ that realistically the vast majority of your consumers are going to ignore, or treat it as a curiosity. And you end up having to deal with somebody’s mother on a Twitter tirade who finds a copy of Atlantis from the PS at a garage sale and wants it to work on their new PS5 so their toddler can play a game.
4. Margins are already slim on consoles, sometimes sold at a loss so the company can get them into as many peoples hands as possible on a bet they’ll make up for that on the games. They need to show a profit or they go under. The money earned from the sale of those old games went bye-bye long ago, either in profits or development of new systems and new games. The added cost and risk don’t make sense for the limited value the functionality is going to offer. It makes more sense to redevelop or remaster the popular games and sell them for a nominal fee for the people that are serious to about wanting to play it. They get a little money back to support the development and they can tighten their support focus considerably which makes for a much stronger product and a better experience for the consumer (ie. you and me).
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