Game rentals advice needed

[cyanfrost]

Hi all.

I've started a games rental business (because I hated the BT Games model) which operates online but I get the feeling my pricing isn't attractive enough so I'd like to do some research.

I don't plan on posting the url for my website because I'm not doing any marketing here. I'd prefer to pay the good folks at NAG for an advert and do things properly so no asking for the url! :)

OPTION 1 - Would you prefer a Gamestop model where you would have the following:
2 games for R99 a month
3 games for R149 a month
4 games for R199 a month

All games would be given and paid for upfront (no contracts or debit orders), delivered to your door (includes pickup) and you would choose the games which are available (like a video store) and not get them randomly based on a wishlist.

OPTIONS 2 - Or is my current model better where you rent per title where newer games cost more than the older ones and you can choose from 3 days, 7 days, and 14 day options with no limit on the amount rented per month. You can also only rent what's available (like in a video store) and delivery and pickup is included like in option 1.

I'm trying to design a service that benefits gamers (I'm one myself) but allows the business to be profitable enough to afford the titles since so many are released per month.

Constructive comments on the two models would be highly appreciated! Also, if this is posted in the wrong discussion section please let me know which section would be more appropriate.

[Chevron]

First you need to see if games for rent are even viable any more. Second hand games are abundant and cheap these days. The only other reason I could of some wanting to rent a game would be just for a day or two to finish a short game or demo a longer game.

Can't really help more as I have no interest in renting games.

[cyanfrost]

I think the market has changed since 2 years ago when I got this idea going. I'm not sure how BT Games manages to keep going with it's rental system but the reason I hated it is because if I wanted to rent game X for a few days I wanted to walk into the store, take it off the shelf immediately, and start playing instead of getting a random selection from them.

However, there has been a proliferation of games on smartphones and tablet PCs and much more is available for download on console than there was 2 years ago.

You say second hand games are abundant but if you wanted to buy Mass Effect 3 second hand where would you find it? I found that I couldn't get the more popular second hand games in the month they were released and had to wait a few weeks before I found a copy for sale in the second hand bin.

[Squirly]

I don't have an opinion on which model would work best, mostly because I really wouldn't know. However, I will reiterate what Chevron said. Is a game rental business even viable? It might still work for a while, but consider that MS wants torpedo the idea of game rentals with their next console by having every game only work on one console. So... yeah.

[Grimnebulin]

I've got a rental account with BT Games, and I'm quite interested to know why you don't think their model is effective? Granted, I don't make use of the online wish list because the last time I attempted to it was a dismal failure, but I've found (and maybe this relates to the particular branch I go to) that whenever I pop in to see what rentals are available, there is always something worthwhile. And this also ties back into what Chevron said, but I reckon the rental model is still completely viable. Yes, second hand games are abundant, and every second week a retail outlet seems to have a sale, but with titles that still fall within the time frame of six months since release, 2nd hand pricing is still relatively expensive. You're not going to find Revelations for under R200 on console 2nd hand, at least not anywhere that I know of, and yet I've just finished playing that as a rental. Last year I played Bulletstorm, Bayonetta, AC:Brotherhood, NBA2k11, Enslaved, Dead Space 2 and more, all for the equivalent cost of buying two new games. I can't see how that isn't excellent value for money.

In terms of the two models you suggest, since you haven't put down any costs for the 2nd option it's hard to judge. I'd say the 2nd model sounds potentially the more viable of the two, but it all comes down to cost. I just wonder whether the 2nd model might not prove too complicated to managed effectively. If there's a good chance I can rent a title that's been out for under two months for the same price as a much older title, why would I pay more? Availability is really the only reason.

Either way, I'd certainly look at renting from you.

[nukehead]

I was trying to remember the name of the Rent-by-mail companies advertised over in the states and stumbled upon this review of online rental companies over there. There is a worrying trend if you look towards the right but if you look at the remaining companies there are a couple essential similarities.

The main 'perks' of renting seem to be free delivery and pick-up - which you seem to offer - no time limit on the rental, offering the latest titles whilst only paying one monthly fee and having the option to purchase the title. The higher the fee the more games you can have out at the same time.

Now I am not entirely sure how the back-end of something like this could work and nor did a lot of the companies in that link, it seems. Hope it helps?

[Toxxyc]

All I want to know is - how are you going to make the business profitable if you provide free delivery and pick up for the games? Also, how will you handle extension of renting times if there are renting times? The risk of games being stolen or receiving phony orders/calls?Above and beyond all this I take it you have a licence allowing you to rent out the games, am I correct?

EDIT: Let's clarify the free delivery/pickup question: It's damn expensive AFAIK. I work with couriers on a daily basis, and having a bunch of drivers if you don't have quantity to justify the driving, don't you think risk/cost/insurance will exceed the monies received therefore operating you at a loss?

EDIT2: Don't think I'm bashing you. If it works, I'll use it. I've just not yet found a renting system that works. Our local video stores sometimes have a few games for rent, but they rent them for 5 business days at the same price of a movie. All good and well, but I don't play a good PS3 title in 5 business days. It usually take 2~3 weeks for me to finish a title, if I sit down every night and play a little. Otherwise some games may take me months to finish (Dragon Age, 150 hours real playtime on my first playthrough). I want to be able to extend, but then again if you place no limit on time rented how can you be sure the guy will even return the game, and how will you handle the cost to the customer then?

[cyanfrost]

Perhaps the BT Games which I've attempted to use have been the letdown in that they didn't have the titles I wanted. I also tried their online service and was ready to slit my wrists because it was a dismal service. I generally found that the games I wanted to rent were always out and I would need to wait 2 months before they were less popular. I wanted a system like Mr Video where you just show up and rent whats there and they would generally have a good selection.

Squirly, I am also concerned about the diskless console which Microsoft are rumoured to be creating but not from a business standpoint but a gamer standpoint. I have existing games which I own on disc and I want to be able to play them on future consoles. I HATED the new Sony PSP which ditched the UMD format since I had invested so much into them and that console failed spectacularly. I also think that in South Africa most people buy games from retailers as internet access isn't always possible so if they punt online only it would be a shame for us here.

Grimnebulin, I'm glad that BT Games are proving effective for you. My other objective was to try to change the existing landscape as retailers were ripping us off and there's already been a reduction in games prices from the online retailers. Even Musica now has 2nd hand options! So the games retail environment has changed dramatically (for the betterment of gamers) over the past 2 years!

[Toxxyc]

My other objective was to try to change the existing landscape as retailers were ripping us off and there's already been a reduction in games prices from the online retailers. Even Musica now has 2nd hand options! So the games retail environment has changed dramatically (for the betterment of gamers) over the past 2 years!

The problem with SA game prices is that physical stores threatened closure if online prices dropped to below in-store prices too much. Really, I think it was discussed here a few months ago.

Anyway, why don't you just open a physical store (walk-in available) where people can still buy/trade second hand games and second hand games only? Don't stock new ones, just rent them out. Keep the rentals separate to the sales and you'll be set (licences differ, AFAIK, rental copies =! sales copies)!

[cyanfrost]

Nukehead, When I first saw that link 2 years ago there were more companies listed! I saw that same article last week and was shocked to see what happened to the other guys. Also with Game having issues in the UK the industry is in turmoil.

Toxxyc, at this point I'm doing deliveries only in a certain area and am hiring guys with scooters which works out much cheaper than a courier. Its more cost effective to pay your own guy a salary than it is to use a courier company oddly enough.
I do have all the required documentation for setting up this business as well as distributor accounts and all the rest. It now just comes down to getting customers. Pilferage and damages is always a risk in any business so you just have to build that into your cost model. Thanks again for your input in the first round of questions I had about a year ago. :)

[cyanfrost]

The problem with SA game prices is that physical stores threatened closure if online prices dropped to below in-store prices too much. Really, I think it was discussed here a few months ago.

There is a HUGE amount of games sold by retailers at the moment and unless broadband becomes cheaper the sales to the masses just won't happen. People don't have access to the internet in a way which could make this possible right now unless something radical happens. I have broadband myself but I still prefer owning a physical copy instead of a digital copy. Especially when services can lock your account and all access to your games which is what happened to some poor oke on Steam the other day (R7000 worth of games). And what if you hard drive crashes? Then you need to download ALL your games again! Not cool. :P

Anyway, why don't you just open a physical store (walk-in available) where people can still buy/trade second hand games and second hand games only? Don't stock new ones, just rent them out. Keep the rentals separate to the sales and you'll be set (licences differ, AFAIK, rental copies =! sales copies)!

Simply put ... it's too expensive and I've seen 3 games rental companies close in this part of the country because they couldn't afford the rent. I'd rather pump that money into stock and provide a better service. And yes, you need a license to rent games and movies (which I have).

[G8crasha]

Well firstly, I agree, the BTGames model is terrible. I'm about to cancel my subscription with them as it is not financially viable. I have a PS3 and Xbox, and they never have good games available for either platform. Any good games that are available are out before I even blink, and the people renting them tend to keep them for 50 years befor they return them.

Although I suggest you read this article about used games on the new PS and Xbox consoles before you consider investing in this project.

[cyanfrost]

Thanks for the link G8crasha! It's an interesting article but I can't see it working in the form this writer discusses. It wouldn't make the current publishers happy who are looking to completely wipe out the 2nd hand market. Remember, it only exists because the prices of games are too high and the prices of games are too high because they're not selling enough units to drop the costs. It's a bit catch-22 right now.

BTW, I'm already invested so I have to make the most of my investment. :)

[Chevron]

Thanks for the link G8crasha! It's an interesting article but I can't see it working in the form this writer discusses. It wouldn't make the current publishers happy who are looking to completely wipe out the 2nd hand market. Remember, it only exists because the prices of games are too high and the prices of games are too high because they're not selling enough units to drop the costs. It's a bit catch-22 right now.

BTW, I'm already invested so I have to make the most of my investment. :)

Game prices are high because making games is very expensive.

[cyanfrost]

Thats not entirely true. I'm in "the industry" of retail myself now and you'll notice a massive difference in price between kalahari.com and a physical Look & Listen store for example. First the developers make the game and get paid a pitance of salary (if they're lucky enough not to get laid off by the company) then the publisher packages and creates the actual game for distributors to sell to retailers. Now from what I understand some of the local distributors buy from international distributors (so they're middle-middle men here) and they add a profit of their own to the price and cover their costs of importing it and having the FPB sniff it out.

Copies are then sold to the retailers who add another profit to the product and pay for marketing and the other usual retail costs so by the time you get the game up to 3 entities have added to the price of the game before it's sold.

By this point most of the costs is on marketing and shipping the products with some buffer built in for damaged goods and returns. This is why the digital copies should be so much cheaper because it cuts out all of this extra stuff and the publisher can sell directly to the customer.

[cyanfrost]

Oh, my point is ... games are expensive because they're expensive to get into your hands ... not so much to make them. :)

[Chevron]

Oh, my point is ... games are expensive because they're expensive to get into your hands ... not so much to make them. :)

On a store bought $60 game, the publisher only gets $12. So 20%. If a game gets sold on Steam the publisher gets 70%.

[cyanfrost]

Didn't know those specifics. That's quite nasty if the facts are correct. :P

[Chevron]

Didn't know those specifics. That's quite nasty if the facts are correct. :P

You made me go double check. That $12 figure is what goes to Sony/Microsoft. Publisher gets 30% from store bought game. The Steam one can vary, but that's the standard figure.

[GeometriX]

There's a standard figure for Steam? According to their brochure, they don't publicly disclose the distributor/publisher split.