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tomx
01-17-2009, 01:45 AM
Hey guys,

I used to be on the .com site but somebody pointed me here. Hope this new site is as helpful as the original one :)

I have a plan to start a online game rental business and I may need your input to see if it's feasible or not. As you know, there are already a lot of web sites today like GameFly.com etc. Just like NetFlix, they charge a monthly fee and you can rent games as many as you want. You just need to return the current one(s) and they will send you the next one(s).

This business model works great for movie rental because people only need to watch the movie once and then return it quicly for next one. But is it also good for game rental? Only for those serious gamers, I guess. For the rest of us, I'd like to rent a game and play it serveral times a week. And if it's a good one, I may play it for a month or 2, then return it when I finally get bored.

So my plan is to start a online game rental business. With a small annual membership fee ($50?), users can rent a game with a small charge ($2 - $3 to cover shipping and handling). They can keep the game as long as they want. And after they return it, they can rent another one.

If you are not a serious gamer, say you only play a new game every month, it just costs you $50 + $3 x 12 = $86 a year which is much less than GameFly (~$200 with the cheapest plan for $15.95 a month).

But this is just an idea at this time. I'm not sure if it's gonna work or not. I'd like to hear from you guys about what you think. Thanks a lot!

Tom

vangogh
01-17-2009, 02:35 AM
First welcome to the forum Tom.

Sounds like a good idea. If I'm understanding right people can rent a game and keep it as long as they want, but can't rent another till they return the first. Under that scenario I'd think the up front fee would need to be at least the cost of the game, which it sounds like you have covered.

Aside from building the site and stocking the games the main thing would seem to be marketing the business and building enough membership to become profitable. Gamers know GameFly, but in the beginning they won't know you. Do you have ideas for how you'll get the word out and attract new members?

Another thought is how much capital will you need. You'll need a site. Can you build that yourself or will you need to hire a developer? Also you'll probably need to stock enough games and copies of games to keep people interested in the site. If you're going to charge a monthly or annual fee you'll need to show you have enough games to get people to pay long term. You'll also need more than one copy of the games. What will you do in the situation where one game is popular and so often rented? Will you be able to guarantee people can get any game or will they have to wait till it's back in stock. What happens if your most popular games are the ones people rent for several months at a time.

I do think your idea can work. GameFly proves there's a market. They have a name though, so what will you do to differentiate yourself from them? What's missing in their business that could deliver? The longer term rental sounds like one way you're trying to offer something they don't. Will that be enough? What else can you offer?

Could you specialize at first in certain types of games. Sports? Adventures? etc. Could you become the place to go for one type of game. You probably won't be able to carry more games than GameFly, but maybe you could carry more of a specific type.

Hope some of the above helps. I'm sure others will follow behind me with more ideas. Thanks again for joining the community.

Steve B
01-17-2009, 07:17 AM
Welcome to the site. I'm glad you found us.

I don't know anything about gaming - but, I'm guessing there is a reason GameFly gets around $200 for their cheapest option. I'm guessing with that much of a difference in your revenue - you will soon find out about some expense you didn't realize. Unless you have a fundemental reason for being cheaper I'm afraid you will find out it isn't a sustainable price.

I know in my industry, every so often, some new company pops up and charges far less than the rest of us. On the surface, they figure they will still make a lot of money because they will get more customers etc. Then they dissappear after about a year or so presumably because they couldn't make enough money. I think they didn't plan on all the "unpaid" stuff that comes with running a business (marketing, customer service, advertising, keeping of inventory, equipment maint. etc.).

I'm not trying to be negative. It's just a reason to really do your research and be realistic about all the costs involved in running a business like this.

phanio
01-17-2009, 11:38 AM
Have you talked with potential customers? What do they want from this type of business? What are they willing to pay? There must be gamer forums out there where you could get input from your potential customer group. Maybe they will even give you a whole new idea on providing this services. e.g. access and play these virtually instead of receiving the game via mail.

Also, find out information about Netflix and GameFly. I am not sure if these companies are public or not. But you should be able to find out some information about them. e.g. what it costs them to provide their service? What struggles they have faced? It is my understanding that Netflix is really struggling. Not enough titles to really keep people interested more that a few months.

billbenson
01-17-2009, 12:42 PM
I'm not a gamer either, but have you looked at the demographics? I'm guessing its mostly kids, but thats a guess.

I would think that a membership site would be much easier to manage than mailing dvd's back and forth. We used to use Netflix, mostly for my wife. She had a job where she had days with only two customers and always had a tv going in the office. She had busy days as well, but week days could be very slow.

What I found out over 4 years or so, is for the Netflix model to work, they can only send out so many dvd's per month. If you rent only three at a time, and keep renting them, they will slow you down. Do some forum searches for more info. Some sort of online gaming site would probably make more sense.

Again, I'm not a gamer, so this is strictly conjecture. Maybe start with a gaming blog and put some survey sort of stuff on there and look at the comments? It could give you some demographics, price points etc????

cbscreative
01-17-2009, 02:00 PM
Let me also welcome you to the forum.

One thought I had on this probably goes under the "hidden cost" that was mentioned above. One problem you always seem to face in renting anything is the total lack of respect that many people have for rentals. You may find your disks are only good for as little as one rental. It could come back trashed.

I don't know what the laws are for rental, but for software in general, you are allowed to make "backup" copies. If the law allows, you may be able to have special licensing where you can send out branded backups instead of the original. At the very least, you will need to plan for disks being defective when returned and be sure your business plan covers it.

tomx
01-18-2009, 12:57 AM
Thank you all for the quick replies! To answer some of your questions,

1. Yes, the user has to return the current one before she/he can rent the next one. Just like GameFly, user needs to build a GameQ and the next game will be selected from the Q.

2. I am a programmer so I could build the web site by myself. I rencently built a web site called brickrental.com to rent lego toys. But later on I realized it's not a very good idea (shipping cost, lost piece issue, etc.) so I didn't even prompt the site.

3. I'm thinking to rent family oriented games (e.g. most of the wii games) and advertise on family/parents related web sites/magazines.

4. I'm not a gamer either, but I have 2 kids and they play wii and DS. Buying games are very expensive and renting from GameFly is not cheap either (I only allow my kids play games during weekend and small kids can play same game for a couple of months). If there is a service like the one I'm thinking, most likely I will use it.

5. I will check out "backup" copies law for game rental business. If it's ture, that'll be so wonderful! Thanks for the hint.

Tom

tomx
01-18-2009, 01:06 AM
I'm not a gamer either, but have you looked at the demographics? I'm guessing its mostly kids, but thats a guess.


Yes, the service I'm thinking is targeting kids (or families with kids). But I don't think GameFly is. I read an article and it says they are targeting 'serious' gamers age between 18 and 36.

Tom

vangogh
01-18-2009, 02:11 AM
the service I'm thinking is targeting kids (or families with kids)

There's how you'll be differentiating yourself from GameFly. The main stumbling block I can see is how much stock you'll have. If people keep coming to the site only to find the game they want is never available they probably won't come back too often. I'm not sure how you go about getting more copies. There's only so many you can buy, but I can't imagine the game companies will let you make unlimited backups since that would hurt sales.

Yeah, the lego idea might not be the most workable, but anything having to do with lego is still cool.

huggytree
01-18-2009, 08:30 AM
the idea is fine...

do you realize how much $ you need to start something like this up? to advertise in magazines, to have thousands(maybe 10's of thousands) of games in stock.....i would think you would need $300,000-$500,000 just to get started...at $50 per game ($50 x 10,000 = $500,000)....yea you will get a much better deal when you buy in such bulk..

what you are charging is definately not enough...1/2 a million invested and repaid $3 per month? and $50 to start?.....wow that seems 1/2 or 1/4 the price you would need to charge....i would think $100 to start and $10 per month would be the minimum...

you need a unique idea.... Wii games only...hmmm i dont know if that really an idea...it sounds more like over specializing and will just cost you 1/2 the market to someone else.....you need to do something DIFFERENT...in this case lower price may be enough to be different since there is only 1 or 2 competitors....lower price w/better service?
when you advertise you need to say why your better.

Dan Furman
01-18-2009, 01:53 PM
Besides what's already mentioned, here are some more stumbling blocks:

#1 - Your fee. Gamefly will let me pay month to month and even start me out for free. From how you make it sound, you would charge $50+ before I even get a game - that won't work. It doesn't matter what the yearly savings are.

#2 - Not that you said it would be, but this definitely doesn't sound like a "spare bedroom" operation. Assume a game a month per member. That means you need to have a minimum of 12 games for each member. Now there will be overlap, but there are hundreds of games - you still need to plan on having lots of games on hand.

#3 - dealing with individual people for small amounts of money, especially through the mail, is a very labor-intensive business.

Lastly... like Huggy said, startup costs would be high - You need, say, 1,000 members to just gross 50k (which is nothing in terms of dollars - MY little one-man operation without any product could not survive on 50k gross sales). But in terms of cost of inventory (see #2), having product for that small membership base is a big dollar number.

Not saying this can't work, but it would need big funding / investment to get going.

In general terms, I have found from experience that one of the worst ways to start a business is to look at an existing, entrenched, successful model and say "I can do it cheaper". There's usually a good reason a successful place gets what they get in terms of dollars. Of course there are exceptions, but I'm not so sure this is one of them.

Still, as evidenced by the Lego idea, you have the mind to think of these things - I'd stop looking at sending things through the mail to individuals, however, and focus on different business models. For example, you said you're a programmer - write a program that solves a problem and market it online.

Edit: - also, Gamefly targets hardcore gamers because that's who rents games online. The ones who know the titles, know when they are released, etc. There may not even be another market.

Lastly, this may not even be viable in a few years. I can see games going all digital sooner rather than later.

As you can tell, I don't like the business model very much (sorry - I've had a million ideas like that too :) )

huggytree
01-18-2009, 05:27 PM
$3 per month per game = $36 per year..probably the $ that you will actually end up paying for the game..where's the profit?

also remember games will be damaged and people will not want to be charged...i wouldnt charge them unless it was the 2nd damaged game...

i think you would need 100+ each of the brand new hits....just like block buster used to be...1 of each of the normal movies, but the big release of the month was a whole rack.. what do you do with all those games when the next month comes? will you just have hundreds of the same game sitting? you will need a way to sell those extra's

if you are out of a game EVER you potentially lose a customer...you must have extra of everything to avoid this possibility...if i order a game and 2x you are out id move on to the next company who always has the game....being able to keep your service top notch is really going to cost alot of $

this is definately not a bedroom operation...im thinking a small warehouse with 25 employees to get started....not a cheap startup.

it may take a year just to think through all the possibilities on this idea....and id expect costs you didnt think of, so id add 10% extra just for those...

i still think $100 startup and $10 per month per game is going to be a realistic starting point...i dont see $3 as even close.

Harold Mansfield
01-19-2009, 01:26 AM
Tomx, Welcome to the forum.

I think you have a great idea, but not being a gamer,
I would like to direct you to http://www.numbthumb.com/ (http://www.numbthumb.com/index.jsp?link=11), who didn't make it, and a few others that are trying to get a piece of the market.
http://www.gamemine.com/ (http://www.gamemine.com/gamemine/index.cfm), http://www.rentgamesnow.com (http://www.rentgamesnow.com/?kid=3969650&gclid=CJS9lK79mZgCFRwwawod0joUnA), and Blockbuster Online-Games Home (http://www.blockbuster.com/games).

You can also get games from iTunes, Apple T.V., XBOX 360 Online, PS3 Online, and the Sci Fi Channel and Spike (who run Game Trailers.com (http://www.gametrailers.com/)) are close behind as well as many others.

Not saying that it can't be done, because it is being done, but the competition is steep and without a large budget there is just no way realistically that you can compete unless you can offer something that the others don't.

I would suggest doing some research about the industry and seeing exactly what you are dealing with and how massive it is, and also check out the known authorities in the industry and see who is doing what. Some good places to start are:
Arcade Mojo
Game Spot
E3 Live
XPLAY, and
IGN

Mind you some of these are owned by NBC/ Universal who is battling it out right now with Sony Entertainment for king of the online gaming market. Other players in the game include Newscorp and Warner Entertainment.

You can link to all of them from a gaming blog that I am putting together here (http://www.blog.resalegames.com/). I have thought about the very same thing at one time, but I missed my window.

I am not trying to discourage you, but that is a huge industry with some very big players, and they are all fighting till the death.

Like I said, it can be done, but you will need to do proper research and come up with a unique selling position.
This is a huge market worth billions to the companies involved. The right video game can cost 1/10 that of a feature film, and make up to 10 times as much.

It's a big market.

I know when you come looking for ideas, this is not what you want to hear, but that is seriously the biggest thing going right now.

I also wanted to add that if you were to get this up and running, you would be most certainly caught in a position of having to covert to digital downloads over mailing out disks, which is where the market is now and heading to convert buyers, the same as music did.
So the model of mailing out disks is headed for extinction already. It may take some years (2 maybe), but disks (just like CD's) are surely doomed for the most part.

As i mentioned before, you can download games and movies from just about every platform (XBOX, PS3, Etc) with an internet connection.

tomx
01-19-2009, 07:30 PM
Thanks again to all of you! The replies are really helpful to make me be more clear on what I'm trying to do. I think the biggest concern is that online gaming is gonna replace this CD/DVD rental thing sooner or later. And as eborg9 pointed out, I probably wont be able to compete with those big players in this area. Anyway, I'm glad to hear from you guys before I did anything. At least it saved me from spending a couple of months to build another web site and end up with not promoting it at all!

Tom

Harold Mansfield
01-20-2009, 12:21 AM
Thanks again to all of you! The replies are really helpful to make me be more clear on what I'm trying to do. I think the biggest concern is that online gaming is gonna replace this CD/DVD rental thing sooner or later. And as eborg9 pointed out, I probably wont be able to compete with those big players in this area. Anyway, I'm glad to hear from you guys before I did anything. At least it saved me from spending a couple of months to build another web site and end up with not promoting it at all!

Tom

I never like to say that someone can't compete. There is always room for competition. It's just that Game Sales and Rentals is the biggest online battle going right now with some hefty wallets involved.
Now, I was thinking about your post....it doesn't mean that you can't get apiece of the action. maybe just another way of doing it.

I have an Ebay store that sells new and used consoles, games, and accessories, and the competition is steep. I really wasn't thinking when I started it, but, I am starting to get a few sales now and then, but I don't see it being one of my good money sites. Out of all the sites that I have, it is probably the hardest to get a decent amount of traffic to, and convert sales.

That industry is just huge.

rezzy
01-26-2009, 04:51 PM
I think the biggest part to think of how will you seperate yourself from other competitors?

For your business model, what will you offer that the others wont. Price IMHO, is not a good marketing point. Will you offer the Wii pieces, ie) Wii Board, knunchuck, etc. Or are you focusing on selling games to families?

I think there is a market for your idea, but its needs to fine tuned into a niche. For example, we all enter into saturated markets unless the idea is new. Somehow we etch out our little piece of earth and slowly move up.

Closely examine the marketplace and see if can one up the competition with something consumers want.

==These are notes I should be heeding myself. :)