Questions about cloud powered gaming

I've been watching the info coming out of E3 and noticed that MS has been talking about the power of the cloud (the often repeated 300 000 servers) will enable new types of great experiences for gamers. We all know that the Xbox One requires an online connection and that some (many?) people don't like it.

So far they have been pretty vague on what the power of the cloud will add to games, which made me think of Maxis and the recent Simcity debacle. I'm not even talking about the server connection issues, but rather the claims that engine was optimised for online play and Maxis servers made the game better, or even possible to begin with. It all turned out to be a lie. The game was running entirely locally, there was no advanced AI or physics running in the cloud. The game was working perfectly fine off-line from a game design perspective.

My first reaction was that MS is facing the response and now tries to come up with a reason to sweeten the deal. To change the message from "we are trying to screw you over" to "look how much this game will be better with an online connection". So essentially going down the Maxis route of trying to add a made up reason to make you feel better about it. But I might be wrong since a lot of the info is still very vague. If they are pulling a Maxis, that's pretty bad, but then I started thinking about what happens if they are telling the truth - that game developers will be able to make better experiences by tapping into the computing power beyond one little box.

But they can't really use any real time online processing for anything important, can they? If you want to off-load part of the AI computations of parts of the physics engine to the cloud, then you have to design your game from the ground up for that.

Whenever I play games, I am pretty much always online and 95-99% of the time the connection is flawless. This is a normal situation for anyone who uses a Wifi home connection. But every now and then, connection will time out or slow down to a crawl. IF that happens in a multiplayer game it becomes unplayable. It's not frequent, just frustrating when it happens. Since I play mostly single-player games, I don't even notice most of the time this happens. The online policy with Xbox One rights management wouldn't affect me in that situation, at least not in any worse way than the Xbox 360, PC or PS3 do today. You'd lose to ability to play online and maybe messaging would crap out as well, but the core single player experience is still fine and in a moment you will automatically resign so you don't even notice any hassle.

But if their talk of cloud powered gaming is anything other than PR smoke screen then I am dreading it. If any component of the game engine relies on outside resources then the potential for it to go wrong is far greater than just some people being annoyed at their ownership rights being trampled. Maybe the improvements will be so great that no one will care. If my game can be twice as fun and in a two hour session I'll maybe get a bad experience for a couple of minutes, or I can't play a game for one evening every month or two, then maybe the trade off would be worth it.

What do you think? Is MS just trying to put a positive spin on it, Maxis style? Are they really going to make the cloud a core part of playing a game, and if yes, then how can they get around the sad reality that stability of consumers ISP services can't provide a rock solid experience 99,99% of the time, the way local computing power can.