Sean Spector was sitting in his darkened bedroom at 2 a.m., engrossed in a marathon session on the video game "Halo," when he caught an entrepreneurial opportunity in his cross hairs: Why not do for gaming what Netflix Inc. had done for movies?
Spector was nearly done saving the galaxy from alien bad guys when he realized that it took only a few days to play through a game that cost him $50.
"The challenge of being a gamer is that you can never afford to play all the games you want to play," said Spector, who teamed up in 2002 with fellow video game zealot Jung Suh to found GameFly Inc., a Los Angeles-based firm that charges customers a monthly fee to rent video games by mail.
The privately held GameFly has emerged as a leader among at least half a dozen fledgling firms attempting to take the business blueprint laid out by Netflix and apply it to the booming video game business, which racked up $7.3 billion in software sales last year.
Rental companies such as GameFly predict big opportunities over the next year as new game consoles from Microsoft Corp. and Sony Corp. debut. New systems generally generate a flurry of buying, but gamers fear that the cost of next-generation titles may rise above $50, providing a new incentive to rent.
But some industry observers are skeptical of the economic underpinnings of online video game rental firms, which pay far more for games than Netflix pays for movies. They note that the shelf life of most video game titles is much shorter than it is for movies, leaving little value in offering a deep catalog.
"I think GameFly's just toast," said Michael Pachter, an analyst with Wedbush Morgan Securities. "I think they're an idea in search of a business model.... You might want to see 'Mission Impossible' " years after it was released, but "you don't want to play 'Madden Football 1995.' "
Moreover, the companies continue to be dogged by the prospect that one of the titans of the movie rental business -- Blockbuster Inc. or perhaps even Netflix -- will begin offering video game rentals online.
An executive for Blockbuster, which currently rents video games from its store locations, indicated through a spokeswoman that this year the company would consider adding games to its online subscription offerings, though he cautioned that the company was satisfied with its current approach.
