VentureBeat has an article based on the widespread skepticism about the OnLive service unveiled at GDC, as pundits have expressed disbelief that cloud gaming is practical from technological and/or financial standpoints. They have feedback from a number of industry luminaries on the topic, most of whom say they are taking a wait-and-see approach. They also get a response from OnLive's Steve Perlman to speculation that OnLive will not be practical, here's a bit, which specifically addresses a recent editorial on Eurogamer:

He’s confusing compression latency (1ms) with frame time. The frame time is NOT 1ms (which would imply 1000 fps). It’s 16.7ms (which implies 60fps). Just as linear video compression time is much HIGHER latency than one frame time (e.g. 500ms latency does NOT imply a 2fps frame rate), interactive video compression is much LOWER latency that one frame time.

Regarding server costs, he does not understand server economics. It doesn’t matter how many subscribers you have per server. It matters how much revenue you earn per server. Most web services are ad-supported and CPM-based and need to have thousands (if not millions) of users per server over the course of a month in order to pay for the server because they earn a tiny fraction of a cent per user.

OnLive servers earn many dollars per user each month (many orders of magnitude more than a CPM-based business), and when one user is offline, another user is online, so even a server that is only serving one user at a time (e.g. for Crysis), is reused by many users each month. The useful life of a server is probably around 3 years. so, if you amortize the cost of a server over 36 months, you quickly realize that on a monthly basis, the cost per server is very low. And lastly, the cost of a server is much less than a home gamer PC: we don’t have the case, disk drive, optical drive, etc. And we don’t have to worry about retail markup, customer service, etc. Long story short, the revenue per server per month is much higher than the cost of the server. It makes OnLive a very healthy business.