3. The lag question always hanged
It was impossible; no matter how many impressive tech demonstrations that OnLive provided, there was always the question of whether the service would be enfeebled by its dependency on internet speeds. And certainly in this case, the question alone was enough to put people off.
OnLive recommends an internet connection of about 5 Mbits per second or faster, and a 2 Mbits per second connection meets the minimum system requirements. Yet what that didn't account for was random drop-outs that internet users invariably suffer from time to time, as well as bandwidth issues if - heaven forbid - more than one person uses the internet in each household.
While in practice OnLive often held firm on fairly basic connection speeds, the player can be distracted by even the most subtlest signs of lag. For a medium that trades on immersion, this was always going to look inferior to the reliability of stored content.