The Looming Cloud-Streaming Game Wars: OnLive Partners with Google TV

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Forget “what’s in your wallet,” what’s in your TV? If you’re looking to pick up one of these newfangled Google TV-based televisions, make that OnLive, the cloud-streaming game service that lets you play high-end video games over the Internet without worrying about platforms, downloads, installs, or system specs.

The news comes in the wake of LG’s big announcement at CES that it’s partnering with OnLive competitor Gaikai to bring streaming games content — not the full smorgasbord, but an LG-selected number — to its Smart TV lineup later this year. Like OnLive, Gaikai lets you stream high-end PC games providing you have a 3 Mbit/s (5 Mbit/s recommended) connection. You play the games using a USB gamepad that connects directly to the TV.

(MORE: Check out Techland’s coverage of the 2012 Consumer Electronics Show)

When I heard the LG announcement, my first thought was, “Where’s OnLive in all this?” Chances are you’ve heard of OnLive (and not Gaikai) because they’re the company that’s been out in front of this technology the longest and loudest. They first made waves back in 2009, prompting skeptics to claim the idea couldn’t work because of latency issues. Undeterred, they launched in June 2010, rolling out a $99 “MicroConsole TV Adapter” with a wireless gamepad on December 10. You still pay for the games, of course, but you don’t have to manage local PC hardware or worry whether your video card’s fast enough to run stuff like Arkham City or Skyrim at 30 frames per second.

The tradeoff when you’re streaming games is (and probably always will be) image quality. TCP/IP-based Internet connections are noisy, and will be well into the future. If anything happens between a cloud-streaming service’s servers and your local thin client — be it OnLive’s micro-console, an LG 55-inch television screen, or something running Google TV — you get ugly “artifacts,” a byproduct of the streaming service’s attempt to compensate for data-stream loss by reducing the quality of the feed. And when the quality’s reduced, your overall picture starts to look like a noisy analog coaxial signal piped through a crappy standard-definition TV.

The verdict’s still out on cloud-streaming’s usability across all player types — I’m a higher-end gamer and care about visual fidelity enough that cloud-streaming doesn’t do it for me — but the announcement that OnLive will partner with Google TV (it’ll be a standard feature on all Google TV devices from all manufacturers, in fact) reaches up and power-slams the ball back at competitors like Gaikai. Where would you rather be if you wanted to get in front of consumers: In LG’s Smart TV lineup, or brand-agnostically (OnLive claims “most TV manufacturers”) on any set running Google TV?

I don’t expect Gaikai to sit on its laurels. There’s no reason cloud-streaming services can’t coexist and compete on the merits of their features (as Netflix and Hulu do). Exclusivity could change that, of course, but I don’t see OnLive using that word in its press release, and I’d be surprised if Google limited its Google TV platform, which needs all the support it can get, by locking out respectable content providers.

While I’m not personally lining up to buy one and I can’t imagine traditional gamers would ever purchase a set running the Google TV platform just for the OnLive experience, OnLive’s deal ranks high on the stealth-meter. Here out, anyone picking up a Google TV-based set has an OnLive microconsole built in. All they’ll need is a USB gamepad, and if the set manufacturer bundles a USB (or better yet, wireless) gamepad to push the gaming angle, all the better from where OnLive’s sitting. Younger players and casual gamers who care less about Absolute Visual Fidelity might sample then get hooked on OnLive, bypassing consoles from Nintendo, Microsoft or Sony entirely.

That’s what OnLive (and Gaikai) are counting on. This technology isn’t going away. It’s not a gimmick like stereoscopic 3D. And if at some point the service manages to all but eliminate latency issues and compression artifacts, it’ll upend the games industry as we know it.

MORE: Now OnLive Is Putting Windows in the Cloud

Matt Peckham is a reporter at TIME. Find him on Twitter at @mattpeckham, Google+ or Facebook. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.