Say Goodbye to Sony's (NYSE:SNE) PlayStation and Microsoft's (Nasdaq:MSFT) Xbox, Cloud Gaming Has Arrived!

If Sony (NYSE:SNE) and Microsoft (Nasdaq:MSFT) were smart, they'd immediately begin a response to the online gaming site OnLive, which is now streaming games directly to the TV from the Internet.

Is this the future Netflix (Nasdaq:NFLX) of gaming? Maybe.

All of it depends on their ability to work the kinks out of the system and secure deals with gaming companies to offer a wide range of games to users.

But the potential to be disruptive is very real, and it's not that far away from becoming a reality; if they're not responded to by the console makers.

OnLive has been around for a little while, but it appears they're ramping it up to the next level, giving pause to those watching the sector.

If anyone thinks entertainment of all kinds isn't going to eventually end up on the Internet somehow and then be downloaded to a screen of some size, is fooling themselves, this is where the revolution is heading to, no matter what the type of entertainment being offered.

At this time OnLive isn't simple enough for the masses to embrace, as there's some shortfalls and limitations to setting it up if you don't have an ethernet set up in your home. You have to be pretty savvy with setting things up to work your way around the problem, or at least know someone that can.

The other challenge, as mentioned, is for OnLive to garner more titles to offer up a good variety for users in order to make them feel they're getting their money's worth.

The strengths are similar to other Internet strengths, like sharing things you do in the game with other OnLive users. You can also watch others as they play their games in real time; it's called "Arena." You can let them know one way or the other what you think of their play. There are also apps you can use to view sessions of other players on Apple's (Nasdaq:AAPL) iPad, suggesting additional apps in the future.

The price at this time? Only $99, and it comes with the adapter for the TV and a wireless handheld controller and one game.

Users say it plays very close to the experience of a console, a must to be a seriously disruptive product.

OnLive isn't quite there yet, but they're not far away. For console makers to sit back and wait would be a huge mistake, and they're already behind the curve on this one. They should respond quickly if they don't want to get NexFlixed.