Very intresting article on eurogamer about why as they say "It Cant Possibly Work"
Some Quotes -
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I love industry-shaking announcements. I love new, game-changing hardware, and I'm absolutely, almost literally exploding with excitement about the new OnLive gaming concept.
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The concept is remarkably simple. The actual hardware generating the visuals and running the gameplay isn't owned by you. Instead it's held somewhere else in the world. That hardware then encodes its visual output and beams it to you over the internet.
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There's only one slight problem. Realistically, there is no way it can work to the extent suggested, and no way it can provide a gaming experience as good as the one you already have without inherent compromises. It's a great idea, and an intriguing demo that is amazing in that it actually works at all. However, away from the concept and the tech demos running in controlled conditions, OnLive raises so many technical questions and seemingly overcomes so many impossible challenges that it can't possibly work.
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In essence, we're looking at several very specific challenges for OnLive to overcome - challenges that are either massive in scope, or technologically beyond the very best minds of their respective fields. For this to work, we're talking about a generational leap in not one, but several fields of technology.
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I know I've quoted a fair bit above but that was just to give people an idea of what the article is about. The full 2 page article can be read
Here and make's some good points(Not All). Very good read if you can be bothered lol.