They can probably track accurately enough to identify that 90% of games aren't worth billing. Then once they are working with the top 10%, they can negotiate something that makes sense, like submit your monthly sales number, and Unity will use that as a limit on install count.
I agree what they are saying isn't workable, but that idea of install based fee could work, and would be better than a royalty for many.
Does a reinstall of an app on the same device count towards the Unity Runtime Fee?
No, we are not going to charge a fee for reinstalls.
https://unity.com/pricing-updates