Do you realize Onlive failed on performance merits alone .. while incorporating tricks like video compression/decompression 'racing the beam' (to avoid waiting for whole frame). Even with all the highly custom magic most games felt LAGGY. Here with this EC2 implementation we see 30-50ms on top of network latency to get you a picture on the screen to begin with.
Almost no one will pay for laggy games at last gen resolution.
some people are clearly willing to use it, especially for games that are a bit more casual and story driven. and like I said there's no huge risk where you're sitting on all this top-end hardware to play the games with this setup.
On top of that hardware costs vs performance along with hardware h264 encoding is getting cheaper.