All of the questions about Gaikai and OnLive have revolved around whether the streaming technology actually works. Can a company actually process your games on a remote server, and then stream them to you in a playable format? For Gaikai's CEO Dave Perry, there's no question: It works. "Yeah. Yeah," he says. "Absolutely. No problem at all."

The question that Gaikai is trying to answer, then, isn't about whether the cloud works, but how. OnLive has launched with a subscription model, but Perry's doing it differently. Rather than build a service for customers, he wants Gaikai to serve as a sort of distributor -- a go-between for game publishers (like EA and Activision), online content creators (like Joystiq), and game players. Gaikai's "secret sauce" isn't in the streaming technology itself, but in the business model that makes it possible and profitable for everyone.

Perry explained his plan to us in detail at the company's headquarters in Southern California last week, and told us why and how Gaikai is different from all of the other streaming services out there.

The most basic way to see Gaikai is from the perspective of a user. Let's say you're browsing Joystiq, and you happen to read a post about, say, Mass Effect 3. At the bottom of the post, because you happen to live in the middle of a large metropolitan area (more on this in a bit), you see a little popup window that says, "Play the Mass Effect 3 demo right here and now." You click that button, and all of a sudden, a fully playable, fully interactive demo of the upcoming game appears, processed and rendered on a remote server and streamed to your browser. You play through the demo, and at the end, you're offered a chance to preorder the game, and clicking a link sends you to, where you can happily give them your money if you so choose.

Gaikai is designed to bring players into games cheaply, quickly, and with as little friction as possible.

Sounds simple, right? To the user, it's a piece of cake, and that's the point of Gaikai. "It's like banner advertising on steroids," says Perry. In these lofty days of constant releases and free-to-play titles, many game publishers just want players, and Gaikai is designed to bring players into games cheaply, quickly, and with as little friction as possible. Bringing in players costs money, and Gaikai aims to make that acquisition cost cheaper so publishers can make more profit per player. "You can literally turn a company around just by tweaking those numbers," says Perry.

So how does Gaikai make that streaming demo happen? First, someone's got to pay for the server time, and in Gaikai's case, it's the publishers. In the Mass Effect example, EA is paying Gaikai to run the game on the service: One cent per minute, per player. That's cheap when compared to the traditional methods of attracting players, says Perry, not to mention that if someone is already online and reading about your game (since the post is about Mass Effect), they're players you want to reach anyway.

Second, someone's got to bring the players in. Gaikai is making deals right now (in fact, some deals are already made -- "We're already embedded secretly in some sites") with online content providers, and the plan is to pay out half of the per player charge to sites who embed the playable games. A gaming news site could work, but so could EA's own site, or Gamestop's site, or anywhere content owners agree to plant one line of Javascript -- that's all it takes to put the widget in.

That's where Perry says Gaikai is most different from a subscription service like OnLive. OnLive built the servers and waited for the audience to come, but Perry plans to get an audience from content providers, and will build the servers to match. If OnLive's audience ever outscales its infrastructure, says Perry, it'll find trouble. "It would be like you coming home from work and sitting down to watch a show on TV, and seeing, 'Sorry, there's too many people watching right now.'"

But Gaikai's plan is to only show the embedded games to people who are already in the right areas of coverage to play them -- the image above is their current server coverage, and if you're not in the green, you won't ever see the embed. "There's no expectation" for players, Perry says. "There's nothing saying click here and then, 'Oh sorry, you can't play.'" And the company is also watching the embed closely, even when players don't see the games -- if Gaikai sees that the entire town of Taylor, Nebraska is loading the pages where their games are embedded, but not able to play, that's where to put the next server. "We're not guessing anything" in terms of coverage, says Perry. "It's all just data."

Because he can pick and choose his audience, Perry says he'll also be able to pick and choose the games on the service. "We can bring on one, or two, or three, and see what happens." Because of that freedom, he also plans to avoid problems like OnLive customers not being able to play Mass Effect 2 on the Mac because it's not licensed for that platform. "If someone starts fooling around with the licensing," says Perry, "I don't want that game. There's another game somewhere else that we'll take. We're not going to start tap dancing."

Finally, once the audience (from the content sites) is connected with publishers (who are paying Gaikai for the server time) and the games are being played, it's time to make the sale -- Gaikai will be selling both games and preorders from its embeds, and those sales can be performed either by publishers themselves, or in conjunction with retailers like Gamestop. That's the basic model, but there are all sorts of other possible combinations -- publishers can embed the games on their own sites and get their audience from advertising, content producers can pay for their own server time if there's a game worth sharing, or retailers can offer embeddable beta access for preordered games, and so on.

"I had a bunch of other projects going that I was personally funding, and I shut down everything for this. So I believe incredibly strongly in what we're doing."- Dave Perry

Perry doesn't think that a system like this will replace all gaming -- hardcore gamers will still want their own consoles, even while they might try out a demo or a beta on a service like Gaikai. But just the same, he's convinced that Gaikai can access a bigger audience for game publishers. "I had a bunch of other projects going that I was personally funding, and I shut down everything for this. So I believe incredibly strongly in what we're doing." Once the service is up and running, Perry says he even plans to donate extra server time to indie games, just because they too could use the extra audience, even if they can't afford the server fees.

That's the plan so far, but when is this all going to happen? There's a reason EA was used in that example above -- the company has already signed on for all of its future titles, and Perry says that it's already prepaid for the server time. And more announcements are coming, says Perry, from game publishers, content providers, and retailers. "If we can get EA to support us, and we have, I'm doing the same thing with retail, I'm doing the same thing with news media -- I'm literally choosing those biggest companies and getting them all to support us."

Perry says we can expect to hear more announcements about deals soon, and it'll be around 60 to 90 days until we start to see the embeds in the wild. There are 10 data centers installed now, and four more coming before launch. OnLive's launch has more or less answered the question about cloud computing -- the technology exists, and it works, at least with a limited beta audience. But Gaikai is planning to not only scale the idea, but also keep it profitable for everyone involved.

This article was originally published on Joystiq.

Time for a bit more of the Portal 2 E3 demo