Fair Use Not Applicable (Score 3, Insightful)

A lot of posts are citing "fair use," which doesn't apply in this situation - there is no "fair use" doctrine when it comes to commercial purposes. The law states that you may not, either directly, or indirectly, profit from another's copyright without their express permission. This legal stipulation rules out almost any type of rental model of copyrighted material that isn't endorsed by the copyright's owner.

While the library example is a compelling argument to defend a service like this, libraries aren't restricted by the same laws. Libraries are exempt for two reasons: First, as public institutions, they receive special protection. Second, they aren't charging for their service, and so they aren't profiting from the rental of the material (they don't rent material, but loan it - a small, but important distinction).

In contrast, Video rental stores (at least all those I'm aware of) do pay a premium on their VHS and DVD purchases to buy what is essentially a rental license. That's why it's legal for them to rent movies, but not for you, who doesn't hold that licence, to do it. Commercial use of someone else's copyright is restricted by law.

Four years ago I had a grand plan to use a very similar model to distribute music. Before doing extensive research I even thought I could circumvent the stipulation because I wasn't going to charge, but was going to generate my avenue via advertising. Unfortunately, the "directly, or indirectly" clause has been interpreted broadly - far more broadly than advertising.

Similarly, because of the way the law is worded, I just don't think there's a way to legally distribute ROM's without entering into an agreement with the copyright holders (I looked into this relatively deeply a couple years ago as well). I do, however, hope that someone does manage to successfully enter into an arrangement with these companies - many of those old games are just too good to lose to time.