Could Digital Rental be the new Arcade?

Steve Jobs has said that the iTouch/iPhone is now the most popular portable games machine; certainly, the iOS scene has more games than any other platform by a huge factor.

A key reason for this, I believe, is the $0.99 price point for most games; it makes purchases an impulse decision, and allows gamers to try something a little more obscure than normal, because it’s cheap enough that even if you only play it for 5 minutes it doesn’t feel like a waste … and of course once in a while you find that app which is so great you’d willingly pay more to keep playing.

By contrast a console gaming purchase is far more deliberated; $50-$70 for a retail product is not “impulse” – even $10-$20 for a download is a significant decision for most.

Do I really want to spend that money for something I may only play for 5 minutes? Probably not.

So how can you make a $0.99 model work for console games? It’s not practical for full releases, but …

Recently TV and film companies have been working with Apple, Amazon and others to create a market for “rental” of films and TV shows. These rentals work like rentals at your regular rental store, i.e. pay a small amount, watch the DVD for a limited time, then return it or pay more.

The other day, as I was walking past a desolate arcade, it occurred to me that this “rental” model is kind of similar to how we used to pay for games in arcades. Pay $0.50, play until you run out of time (or lives) and then pay more if you want to keep going, or move on to the next game and see if you like that more. Those arcade games had serious production values; huge production & distribution costs; and yet somehow made viable business sense at $0.50 a pop.

So, why not use the same “rental” or “arcade pay-per-play” model for retail games?

What??? I can already rent any game from Blockbuster; what are you on about?

Well, while it’s true that you can rent full retail games for a tiny amount; that model is completely broken, in so many ways - as far as developers are concerned:

1)      When a player rents a game from a rental store they get it for a minimum of 24 hours, often as much as a week. That’s more than enough to finish most games (or at least play them long enough to get sick of them). Yet it’s only one “rental” payment of about $5. (Think about it - that would be like being able to play the same game in an arcade for a week, for a single payment of just “10 coins”!)

2)      Also - none of that “rental” payment goes to the developer/publisher. A rental copy counts as a “sale” when the store buys it, so that’s one copy sold, but all rental proceeds go to the store – none to the developer.

What if we changed the rental model so that it was a “digital” rental? E.g.:

1)      The player “rents” the game for $0.99. For this they get to play the game for an hour (or a set number of levels, lives, or some such).

2)      At the end of that play time, they can pay another $0.99 to keep playing, or they can buy the full game (discounted by the amount of money they’ve already paid)

This would mean:

a)      Developer/publisher get up to 70% of “rental” charges (or whatever the standard downloadable %age is at the time) – making money off every rental.

b)      Players can try many more game and just pay for what they want

Certainly I can imagine people objecting to paying like this.  But it worked for the arcades, and it’s not a big leap to see the similarities between this proposed paradigm and the very successful micro-payment strategies used in social-type games.

And, yes, there would be other side effects too, such as:

a)      Developers would bias their game development to be all about high-quality “first hour” experiences, to get players to pay more.

b)      Developers produce games that encourage repeat play – to encourage repeat pay.

c)      Developers can produce more eclectic games (‘cause there’s a greater chance players will punt $0.99 to try something obscure)

But would any of these really be a bad thing?

We have established download markets (PSN, XBLA, Steam etc.); we have proof that $0.99 payments work for games (iPhone/iTouch); and we have burgeoning markets for the concept of $0.99 rental in other media; why don’t we give it a try?