Legit Reviews came across rumors that Sony's next-gen console might be nothing more than the current PS3 using Gaikai's streaming service.
So, is this financial suicide? Quite likely not, since the world is in a bit of a depression right now, with the biggest recession since the end of World War 1, making a $500-$600 (£300-£400) console a tough sell in such a market and likely won't do well. Therefore, Sony can continue to sell what is becoming an ever cheaper console to make and therefore sell at an ever reducing price, then simply have it render the pictures streamed to it over the internet. This could look like a much more attractive option to cash-strapped gamers than a next gen 'Xbox 720' from the competition at that $600 price.
The graphics quality is on par with current consoles already and will likely be improved on by Sony to make it more attractive for potential customers.