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vivster said:

But how many people really play older games and would like to pay premium for it? The service will be unplayable for people depending on their delay tolerance and where they live. Being stable doesn't change the technology behind it with its inherent lag.

In whole it just has so many possible drawbacks(content, price, lag), each of which alone could mean the death of the service.

Sony said you will only need a 5MB/sec speed to have a good experience with PSNow. The average speed in the US is already past that, and is increasing pretty quickly, so the main problem will be the server side stability. 

As i said this gen people have been willing to spend £40 for a HD collection of a single series. If that many people are willing to fork out that kinda money to play a single series in HD, then imagine how many will happily jump on getting hundreds of SCE games from the PS1/PS2 and PS3 for the same price? Let's not forget you will also be able to rent specific games, for those not willing to sub.

Of course it wont launch with all of them, it only needs to start with some. SCE's games alone could keep PSNow subscribers busy for years, let alone any old third party games they can rope in.