I hope it doesn't happen but the problems you mention are not going to stop it.
While movie streaming is far less costly, what it has proven is that people are fine with lower quality, old titles and not owning anything. A 480p30 game stream service for $15 a month is probably fine for millions of people. Just as Netflix charges more for 4K movies, you can have separate tiers, $25 a month for HD gaming, $35 a month VIP membership for the newest titles and early access.
The initial cost is pretty high, yet a flexible server farm will cost less than designing, manufacturing and selling new hardware at a loss every 6 years. No more splitting your install base with the chance they'll move over to a competitor.
The real problems are latency and stable bandwidth. Bandwidth is always improving, yet latency can't beyond a certain point. With VR launching latency becomes a real issue. Head movements have to be processed locally, frame rates need to be perfectly stable and 75fps or higher. VR will save us from game streaming.
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