I can see things working out, but still expensive, if the hardware also being using for scientific computing and CGI rendering.
Although I'm not sure if gaming hardware can run 24/7.
This is still a fairly niche market, and while there are certainly evening peak times, younger kids have a lot more free time than you might think.
How well the company hosting this is doing, I couldn't tell you, but the product itself seemed to work and work well, so much so that I have had it on my to-do list to try and experience it for myself.
The reason most services need to be located close to clients is because you want to avoid data transit over the open internet. You want as little open internet as possible between you and the client. Traffic that's internal to Google's networks doesn't have that problem. You can use compute / gpu in US-west and transit that data to you via US-east and the additional latency would be measured in nanoseconds.
That's definitely noticeable for latency-sensitive actions. I recently switched a server from Oregon to New Mexico, and I notice the latency increase with mosh.
Moreover, there's not a lot of timezone difference between the east and west coasts of the US. Going someplace like Europe is more like 180 ms.
I've played games with a ping like that, but a lot of the ping was my wifi. Doubling the latency would not make the game a better experience.
This could work well for certain types of game, those that are a little less latency-sensitive. But in general the latency is still a big issue.
[0]: speed of light in fiber is ~ 100e6 m/s, around 3000 miles between coasts
Then I would imagine the problem is that everyone is playing video games at about the same time, i.e. in the evening or at certain times of the week end. So you need to provision for peak usage.
So to me the only benefit to renting is if there are lots of occasional gamers, that do not play every day / every week, including peaks where they would all suddenly play at the same time on certain days (christmas, long week ends, release of new game, etc).
And then of course because the hardware progresses so quickly you need to amortise the hardware pretty fast.
I haven't seen the actual economics but I am surprised it would be much cheaper for consumers.