Whew, at first I thought, from the title of the article, that Spielberg had somehow been caught up in the scam surrounding that "OnLive" hoax. Still, there are some serious snags he didn't catch, but they're far more understandable, since he's a director, producer, and developer, not quite a business strategist.
* Hardware for playing games is expensive. Upon their release, only the Wii cost less to produce than it sold for. This means for what might be considered to be a good-looking gaming experience, the receiver will have to contain at least, say, $300US' worth of hardware, even with a disc drive removed; hard drives may be cheaper and cheaper every day, but they'll still need to spend a pretty penny on a CPU, and especially high-speed RAM. (GDDR3, let alone GDDR5, costs far more than DDR2) Somebody's got to pay for this. Either the consumer is going to have to be willing to swallow that hefty price tag to game there (where then it's hardly any better than a console, as it's optional) or the cable companies are going to have to bet that it'll pay off for them (and likely slap on an extra $10US or so off of every game sale a la Microsoft/Sony)
* There is, yes, an issue of adopting a standard. If each cable company adopts something proprietary, they will invariably fail, due to a lack of choice, as the main cable companies operate local monopolies. Then there's the issue of that this would require a cable company's service; what about the millions who STILL live far beyond where cable bothers to reach? Sattelite isn't really an option for downloads; it's slow, prohibitively expensive, and the typical strategy is to punish any customer that downloads more than 200MB a day. (so in other words, they gouge customers to the tune of $90-120US a month for what amounts to 6GB of bandwidth)
* Lastly, there's some technical downsides, namely, questions over backwards-compatability, and the tranferability of such games; a lot of customers would be rightfuly irritated if they paid >$50US for a game, only to find out later that they could not longer play it when they "upgraded" to a newer device. Unlike consoles, receivers are intrinsicly tied to a service, meaning you can't just swap what you've got plugged in when you want to play something older. Plus, most people play with games that are not registered to them in an online database, ESPECIALLY once you consider all the billions of console games sold.
All told, I can't see this sort of thing even rising to the level of prominence of the big three console makers, let alone wiping out console games. Sure, cable companies are greedy, but they're also incredibly stupid AND greedy. They'll undoubtedly try to do it themselves, but the most they'd do is prompt Valve to start a "Steam for consoles" service, which would almost certainly demolish the cable companies' efforts in that field, as Steam is well-established, while cable companies have countless hurdles just to overcome their own faults.