This model works because none of those "particular gamers" are in the majority, which is what NucNav said.To answer all your questions, the answer is yes those are good for the industry because they are all different scenarios that fill a particular gamers need. They represent choice.
If someone only wants to pay $20 for a game that's fine,as long as there are gamers that want big budget $60 games. Which there are.
There are plenty of kids who only play Pokemon,which again is fine as long as there are plenty of kids willing to play Halo as well. Which there are.
Renting games allows people who would otherwise not be willing to or able to buy games, to acess them. Some revenue is better than none.
Should I go on?
Now part two of the game:
1) Developers only make easy-to-produce games since the majority of gamers will only pay 20$ at most for a game
2) Developers will only make games based on Pokemon, since the majority of gamers will only buy a game that involves Pokemon of some sort
Etc.