It will kill nothing. The notion of paying for the console itself, paying for a monthly subscription, paying for the game, having to constantly be online to play the game and not actually owning the game is unappealing to...well to fucking everyone.
Sure, the fact that you won't have to buy a console or upgrade your computer every 5 to 10 years is...well it's not appealing at all since you're paying 180 a year just to be able to log on.
Let's see here:
A new generation of consoles will most likely arise in about 3 more years. Assuming my assumption is correct, you'll have to ditch out about 300 dollars if you want to buy an 8th generation console at launch. In 3 years, you'll have to pay 540 dollars just to be able to log on to OnLive.
When it comes to PC's then you'll most likely pay anywhere from 100 dollars to 500 dollars depending on what you want to upgrade on your computer so technically, even if you spend about 500 dollars, you're still going to come off cheaper by not using OnLive at all because of the games themselves.
The conclusion?
You'll pay 300 dollars once in 3 years and be able to buy games easily, own said games and have a lag free experience using a console.
You'll pay anywhere from 100 to 500 bucks upgrading a PC in 3 years but you'll be able to buy games and own either a digital or hard copy of said games and have a lag free experience.
You'll pay 540 bucks in 3 years just to be able to access the store which lets you buy games that can cost anywhere from 50 to 60 bucks. You also do not own a digital or hard copy of the game but instead simply watch a live stream of you playing AND, depending on your connection, you'll most likely experience lag quite a bit.