Established: Video Game Rentals Hurt Sales

By: Sharudin Rahmat

Frank N. Magid Associates has been looking into the buying and renting habits of consumers recently. Their report begins by noting that approximately 40 percent of console gamers - 30 percent of which are adolescents - rented at least one game in the last year. Only half of this number goes on to buy the games that they rent. The report concludes by noting that a mere nine percent of game renters go on to purchase just 11 percent or more of the games they rent.

That's still a large number considering that almost 40 percent of weekly console gamers report renting at least one game in the last year. With their limited disposable income, teenagers represent almost 30 percent of game renters even though they make up only 12 percent of the total gamer population. Teens are both more cost-sensitive and also have the time to rent and try new games before buying.

"More often than not consumers tell us they don't buy a rental game because it was not very good or it is too short," says analyst Mike Vorhaus. "Rental play does not lead to significant purchases of those rented games."

Almost 50 percent of gamers report buying NONE of the games that they rented in the last year.

Blockbuster Busts Developers' Bottom Line

Developers generally viewed rentals as no big deal. What's changed is that games are much shorter than they used to be. In addition, the game industry releases new games to store shelves AND rental stores on the same day. The question then arises as to whether it's legal to disallow rental stores from buying games at Best Buy and then renting them without the copyright holder's permission.

Another issue arises with the rental of PC games - since it's so easy to pirate them. Stores instantly get hurt since people with PC's can rent the game, install it at home, perhaps copy it (or just leave it installed on the machine), and return the title well in advance of the due date. The need to buy the game is instantly removed and while rentals do great, sales drop off.

It's also possible to obtain PSP games for next to nothing on the Internet - the legal way is to pay the membership fee of one of the many sites that offer this service. There are also sites where you do not have to pay anything but when you download there are viruses, spyware and other forms of malware that come bundled with the software package.

The rap on video games is that they're expensive and getting pricier. The typical $49.99 manufacturer's suggested retail price is only for gamers who insist on owning a pristine copy of their favorite games. Other, less-fussy gamers can plunk down $27.99 for a so-called pre-owned copy and go home, knowing that they just saved 44% on what is essentially the same game - perhaps without a manual or box - but guaranteed to work nonetheless.

In spite of these setbacks, the recent years, in particular 2005 have been good to the gaming industry, due mostly in part to handheld gaming. The NPD Group reports U.S. game rental sales hit a record 10.5 billion in 2005, breaking the previous record of 10.3 billion set back in 2002.

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