Developers would loathe this. The average game takes 8-12 hours to beat. Most average gamers only play through a game once, if they even finish at all. That's 16-24 dollars average per game. Even if they lost 1/3 of sales directly due to piracy, they would make more money selling a game for 50-60 dollars with an open license, as they do now.
Developers don't get anywhere near $50 or $60 dollars when they sell a game. After Sony, Microsoft, Walmart and/or Valve take their cut, they're lucky to make $25. But whatever number you want to believe developers make now they believe they could make more, by charging $2, $5 or whatever an hour, if they could just get consumer to accept such a system. Like I said, they've already tried. Valve didnt't create a whole an Internet cafe licencing scheme because they thought they'd lose money on the deal. (And I'd also note that they have all the infrastructure in place to turn their Steam "subscriptions" into a real subscription service.)
Also, by charging by the hour there is a disincentive to keep playing after you've beaten the game.
So what? Unless developers are charging by the hour there's little incentive for them care.
The fact is that some sort of pay-per-use scheme the holy grail of any content provider. They all wish we could go back to days buying a ticket to a movie was the dominant form entertainment. The movie industry has been in decline since Gone with the Wind, the movie companies area having to settle with trying to make money from DVDs and broadcast rights. TV executives at one time were drooling at the prospect of pay-per-view TV, thinking they could sell all their TV shows that way and make a killing. At one point people in the gaming industry were specuating, hoping really, that games with monthly subscription fees like Ultima Online and EverQuest were the wave the future and all major games would use this much more profiitable model. Tons of money got dumped into games like these, even before World of Warcraft showed how insanely profitable it could be.
The problem is while pay-per-use would be much profitable for any content provider, that's only true if consumer's are willing to put up with it. So you've got more people watching a movie on DVD or on TV than at a theatre. People only paying for porn on pay-per-view TV. And only certain kinds of games that are able to convince people to shell out cash even on a monthly basis.
So yes, developers would make a lot less money charging by the hour. Consumers wouldn't buy a video game product sold this way. But they all drool at the potential amount of money they could make. The attach rate for all the consoles is in the single digits, while the average American gamer spends
over a dozen hours a week playing games. The average gamer doesn't have a heck of a lot games, but he does spent a lot time playing them.