Blockbuster now renting video games by mail

Blockbuster is now renting out over 3,000 video game titles by mail for PS2, PS3, Xbox, Xbox 360 and Wii consoles. The move positions them to compete with video game rental company Gamefly, and gives them an advantage over competing rent-by-mail company Netflix (who doesn’t offer video games), and kiosk movie rental company Redbox (who offers video game rentals for $2 a night but in limited locations).

To compare, the Blockbuster $8.99 monthly rental fee for one disc out at a time by mail is much cheaper than Gamefly’s monthly rate which runs $15.95 per month for one disc. The $8.99 Blockbuster fee also includes discs from their 95,000 title library, and Blu-rays at no extra charge.

But Redbox and Netflix are not sold on the model. Research firm Merriman Curhan Ford (via Home Media Magazine) found investors in Redbox were not so keen on adding video games to take up valued DVD/Blu-ray slots in their kiosks. There were also concerns about multiple gaming platforms (video games can have up to five platforms – which means five discs — vs. two discs at max for movies).

Still another concern is the longevity of gaming discs. “People are still interested in renting “The Hangover” from last year, but are unlikely to rent Madden 2009 once Madden 2010 comes out,” said Merriman Curhan Ford analyst Eric Wold.

But while Netflix has yet to start adding video games to their library, and Redbox has been slow to implement full kiosk distribution, there is certainly a high demand for new release game titles which cost around $50 or $60 a title vs. $20 to $30 for a new DVD or Blu-ray.

In a related story, Blockbuster also recently partnered with Comcast to offer cable TV subscribers a discount service called “DVDsbyMail,” which is essentially their same service except discounted to $7.99 a month for one disc at a time, and $13.99 a month for two discs at a time (regularly $16.99 a month).

Gamefly should certainly be concerned with the Blockbuster announcement. The less expensive monthly fee and option to trade discs at rental locations does give Blockbuster an edge. If Netflix shares any concern, perhaps they should counter Blockbuster’s move by acquiring Gamefly.