More details.
The way the game designers/developers would be compensated would be based on the total income divided up amongst the games according to play time. That is, the more a game is played, the larger percentage of the total revenue is earned by that developer. So while there isn't an instant payback on the scale of newly released games, there is a long term payback instead. Consider some of the cult games that start off with poor sales and then suddenly gain a stonger following later. Something like that would mean the developer suddenly has an unexpected infusion of cash. Just having a game on the network becomes an asset on the balance sheet of a development company.
Developers can update content / programming online, meaning the games could continue to change, even years after the initial release. That would bring renewed interest to the game which would equate to more revenue, and also improves the game long term. The incentive is for the developer to come up with games that people want to spend a long time playing, and to fix release bugs.
The main publisher would be the company that produces the console. However, other servers can be setup to provide the console with "homebrew" games. No revenue would be split to the other servers, but it would enable homebrew writers the ability to "prove" themselves, show the games they write and when it meets the level of quality that the main publisher is happy with, then the main publisher could either buy the game outright or put the game on the server and begin sharing the revenue with the developer. To end users, it makes no difference where the game is, because it's part of the monthly charge either way.
The SDK would be offered free of charge, or for a very low fee and would actually work on a PC running a simulated console. The SDK wouldn't be fantastic, just enough to get you going. Other developers could sell more extensive gaming engines that handle more of the physics, AI, etc. But it would be enough to get someone who wanted to write the programs able to do them.
