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Machiavellian said:

You keep talking about the internet being the limitation but why does Online and Gaikai work???  You make a statement as if conditions are set in stone.  You make assumptions while dismissing this demo MS just did which the OP mention.

The reason Gaikai is low is because they do not have the infrastucture to scale the game better than medium settings on a decent PC.  Gaikai runs the game just like you would run it on your home PC with the equipment you have.  GaiKai send you the video of that setup and the reason the game does not look like a top end PC is because they are not running top end PC settings.

MS Cloud compute is not constrained by this limitation because MS cloud compute does not run a game instance but instead runs the game code.  MS cloud compute can off load the rendering pipeline of the game to the cloud and process that data using different rendering techniques and steam that data back to the client using H264 or any other video compression scheme.

Its not the vidoe compression thats the problem with Giakai, its that the games are running at Medium to low PC settings and the quality of that image is the result.

Did you already used OnLive or Gaikai?

Due internet connecting bandwidth the OnLive stream servicres gest at maximum 720p@30fps quality.

I tell you gain... the maximum quality setthing for OnLive streaming is 720p@30fps.

That's because the server can't run the game at 1080p or more? No it is because the INTERNECT bandwidth can't streaming suck high quality.

Netflix have streaming issues due internet issues (not server issues).