This is incredibly forward thinking and exactly the type of service Sony needs in order to popularize their Playstation Plus service, which is completely lacking in my view.
Streaming is the future, and the future is now for film and music. Services like Netflix, Hulu, and Spotify occupy a significant portion of my media needs at the present moment, and are replacing outdated methods like television.
I can certainly see an unlimited gaming streaming service being wildly popular over time, just like Netflix picked up steam. Note: Netflix did NOT replace on-demand for new content. I still go to the movies whenever a flick come out that I want, or buy a Blu-Ray when there'a a film I adore and want to see it in the highest quality, multiple times. What Netflix does best is leverage a gigantic catalog of older content in an unlimited fashion.
Fact is, I do not want to individually pay for the vast majority of the content I view on Netflix. Some of it is great content, but I see it as disposable. All content is disposable, really. It's great to watch something I would otherwise not necessarily be interested in simply because I can without penalty. I've paid my monthly free, and I'm able to explore at my leisure without much boundaries.
I can see Playstation Plus w/ Unlimited Game Streaming serving a similar purpose. Sony has 3 generations behind their belt now, an absolutely MASSIVE collection of first party PS1, PS2, and PS3 titles -- MOST of which are not generating them any income. Individually, their value as $5 releases doesn't amount to all that much, and I'd be surprised if the PS1/PS2 games constituted any significant revenue source for them in comparison to their PS3 efforts.
HOWEVER, collectively? This huge catalog represents enormous value for a service that charges $10/mo for unlimited streaming games. Most of these titles I wouldn't necessarily buy as individual $5 purchases. But if I'm allowed to play them for a flat monthly fee, it will allow me to play and experience games that I wouldn't consider before, and many of those games I will probably end up adoring. It's the same way that Netflix and Spotify have dramatically changed my viewing habits, and I've found hidden gems that I would otherwise not be able to experience if I was forced to pay for the content individually.
If Sony can amass an active userbase of streamers, that's $10/mo which is A LOT more than what they would otherwise earn if they exclusively sold these games at $5 a piece. I can't tell you the last time I purchased a PS1 or PS2 game on the PSN store. But I would GLADLY pay $10/mo or $120 per year to experience a massive catalog at my disposal, similar to how I will gladly pay for that service on Netflix or Spotify. Getting millions of active users of PSN Plus at that rate would do wonders for their business, and allow it to evolve and transform our expectations of how we play games.
To those concerned about the feasibility - we're still in the infancy of this technology, but you always need to start somewhere. There's plenty of broadband users NOW who can experience the greatness of this technology without much issue. 10 years ago, that number would have been infinitesimal. 10 years ago I was just getting broadband service from dial-up, and probably had download speeds of 1 MB/s. Now? I get close to 20 MB/s, and that's pretty average for most broadband services these days, and 20 MB/s is more than enough bandwidth to handle something like this. I can't imagine how good the internet will be in another decade, and that's when this technology will truly take hold. Next-gen could be the last gen we ever experience, honestly.
Quite excited to hear about Sony's plans for this at E3.