Just as there is no doubt there are people who are and would prefer not to own physical media, there is also no doubt there are people who would prefer to own physical media... and based on current sales statistics, either by restrictions of their service or their own personal preference, physical media still far outpaces virtual, and I don't think that's going to change significantly over the next five or more years.
As for comparing this to downloads, the difference is that once it's downloaded on your hard drive, you control it for the most part. If OnLive or more likely, your ISP has a problem with their servers, you won't be able to have any access to your games, and what ever other content and services that OnLive will provide. Where as with a console or PC, as long as you aren't wanting to play online, you can continue to play your games (disc or downloaded), watch movies, listen to music, view photos, etc... that alone is likely going to keep a lot of people away from a strictly online system.
I understand what TM is saying about technological progress... heck, it was only ten years ago when it was a big deal that 56K modems became available. However, even in the US, the majority of households do not have broadband, and many areas do not even have the infrastructure for it... and with the state of the world's economy, the notion that companies will be spending billions on expanding the infrastructures for broadband and offering 5Mbps connection speed at a reasonable price that the mass market could afford it is extremely unlikely.
In fact, over the last couple years many ISP companies have been throttling down connection speeds for customers who regularly use the most bandwidth... which has caused quite a stir on the interwebs, especially for people who regularly use bit torrent sites and such.
Legally these companies can get away with it, as most service contracts only mention connection speeds as "up to", and those that mention a minimum are usually many times lower than the max speed possible.
This means that even if you are paying for a 5Mbps connection, that's just the max speed they will guarantee... not the minimum... and connection speeds can fluctuate regularly even within just a few minutes. Just run speedtest.net several times over an hours period and you'll likely see what I'm talking about.
Imagine being in the middle of a great game, only to get disconnected because your connection speed drops below the min necessary speed.
Also, if you have multiple users in your house, all sharing the same modem, then you may find that you'll have to make sure no one else is using the internet while you are playing.
There is also a move by ISPs to consider charging by actual usage... which if so, would likely make using a service like this possibly quite expensive.
And all of these issues are in North America... in many other parts of the world where video games are popular, these internet issues are far worse.
Don't get me wrong though, I think this service could be really cool, and I'll be happily following it as it develops, but as it stands now, and for the foreseeable future, it's going to have a very limited market due to many of the factors already mentioned.
Frankly, if I had any say in OnLive, I would recommend they go after the huge casual game market that Nintendo tapped into, and thus limit the games to SD with standard audio resulting in low bandwidth requirements. This would make the system much more accessible to a larger market. 👍
