How would it not work out for publishers? Obviously, Nintendo would keep track of which games are being rented the most and a portion of the proceeds would be calculated out for each respective publisher. If it's too big a problem, they could put an age limit that any game offered would have to be six months old or something first (or perhaps each individual publisher would decide on the age).
A multitude of publishers have jumped on the Humble Bundle bandwagon, many of which have offered games less than a year old. The publishers are making practically nothing off of these bundles. Rather, it's a PR thing.
From a business standpoint, there is enormous potential here if pieced together properly. Obviously some kinks would need to be worked out, but you're being incredibly shortsighted if you just straight-out dismiss the concepts altogether. The biggest factor that needs to be considered is simply the price point. The rest is cake.
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