Ok, so as long as Massive isn't lying all they know is the game you're playing, which level you're playing and your IP to know where you are located. If you're playing XBox live this is pretty much public information anyway thanks to "live presence" which is available to licensed companies as an SDK from Microsoft. Are you afraid that the advertising company track your lack of skill on Barbie Horse Adventure or what? There is a valid issue of the publisher making money in addition to the first sale of the product, but how much do you think that adds up to? I don't think you'll get a $60 value from each person playing the game to make it free, so if the publisher decides to spend the extra money on quality rather than reduce the price is that really so bad? (Note: I'm not saying I agree with a $60 price point, just that it is the price of a premium game these days)
Well, one thing that OnLive does extremely well is present a tiny black box that is less ugly than a cable box and puts a foot in the predictably revenue generating videogame market. Which tecnhologically challenged venture capitalist wouldn't want to get in on this excitement? I mean, the phantom seemed like a good idea at the time and this lets me own all the hardware and rent it to the public... The returns on investment are astronomical!
One important argument against comparing videogame sales month to month and by previous year's same month is that there simply isn't a Metal Gear Solid, Grand Theft Auto or God of War released the same month of every year. Each other year the one-big-title publishers take a hit because they released a well received game last year. Same problem with delays - a lot of depreciation of value is amounted to games that are delayed into the next calendar year and the next year the publisher surprisingly make an unbelievable recovery. The videogame industry is doing well, people just don't buy games because there aren't that many hot titles to buy right now (unless you're a die-hard GI Joe fan). Early 2010 you'll see starcraft, god of war, and all other titles delayed this year make the greatest year in history for the industry again.
Hang on a minute, the valve article very specifically speaks of first person shooter games and the details of the article does not seem to relate to an open-world racing game (there is no "track" to speak of, just streets). Lag compensation would do nothing to replicate no-lag racing controls as demonstrated by burnout paradise, while it nicely solves the time of pulling the trigger issue of first person games. Also I'm lost as to why a modern PC would not be able to run burnout paradise locally, and how a PC that couldn't handle that could render a full frame of streaming video at 30 fps.