In the small conference room of a Palo Alto, Calif. office Asher Kagan explains a smartphone-sized gadget his company hacked together that seeks to better understand the blockade between him and a service the world has long imagined.

The vision for that service, cloud gaming, resembles Netflix Inc. NFLX, +1.09% , which dispensed with DVDs and cable bundles in favor of streaming content from a faraway data center. Done right, cloud gaming could make powerful, expensive gaming computers and even widely popular consoles into garage-sale relics and irrelevant to the billion-plus people who play videogames world-wide.

All they would need is a screen and the internet.

“What what we’re shooting for is a premium gaming experience, we’re shooting for something that is awesome to play the best games in the industry on any screen in your life,” said Electronic Arts Inc. EA, +1.25% Chief Technology Officer Ken Moss. “We want to do that because we want to give players the opportunity and the choice to play however they want.”

It is a dream of many videogame fans and companies, that see the huge gains Netflix has made against traditional media companies and hope to do the same in a similar arena. Years into many parallel efforts, though, there are obstacles that may be impossible to solve.

That pocket-size gadget Kagan’s team at the cloud-gaming startup Blade hacked together measures the delay between a player pressing a button in a videogame and the time it takes for a cloud-based machine to process each action and send graphics and sound back. That delay is called latency, and it is the biggest technical challenge standing in the way of making something that could accurately be described as the Netflix for games.

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Latency is something that Kagan and others working on cloud gaming, such as Nvidia Corp. NVDA, +3.23% and EA, have spent a lot of time thinking about.

“We had a lot of challenges with latency and how to reduce it, and how to really reduce it to this level that it feels like you’re running it locally.” Kagan said, describing several innovations that have shaved milliseconds off the time it takes to deliver a new frame to a player’s screen. “On that, we've implemented a lot of patents, but also lots of pure development work.”

One part of fighting latency is widespread access to high-speed broadband, and that is getting closer. With the average U.S. connection three times what’s needed for a Netflix HD video stream, videogame titans such as EA and Microsoft Corp. MSFT, +1.86% have signaled interest in developing cloud gaming. There are even reports that Alphabet Inc.-owned Google GOOGL, +1.69% GOOG, +1.51% is interested too.

A crucial difference from over-the-top video is the technology and code underneath: since games are interactive, it’s impossible to, for example, send chunks of a show ahead of where the viewer is, as Netflix does. Called buffering in industry jargon, it means slight network disruptions won’t impact viewing. But that’s impossible for videogames, and even slight interruptions in the data stream can literally kill a player in a game.

“The No. 1 thing you come across when you think about cloud gaming and tech challenges is going to be latency,” Moss said. “That’s a big question a lot of people ask: will you be able to have what we like to think of as imperceptible latency in the real world, can you have that on the real networks people are going to have in their living rooms and the devices people are going to have in their lives?”

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EA showcased a potential offering at the massive E3 videogame industry conference earlier in June along with a Netflix-like premium subscription service which will launch this summer. The subscription service gives players access to a library of titles for download onto local machines.

“The technology here actually is a huge leap forward,” said Moss of the company’s technical cloud gaming demo.

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EA’s game streaming service isn’t ready yet, and beyond solving latency, Moss says his teams have taken pains to tackle other technical challenges that come with streaming a game into someone’s living room: an inefficient wireless router, or public cloud infrastructure that’s not tuned properly for gaming.

While Moss can’t control an in-home setup directly, his teams have spent time ensuring data centers work, hacking the public cloud infrastructure to serve unique needs, as well as running games in a cost-effective manner and as close to players as possible — for latency (again).

Like Blade, Nvidia’s cloud gaming tech is available to consumers. It has been around for the Shield smart TV devices since December 2013 and this year, the software became available in closed beta for Windows and Apple Inc.’s AAPL, +1.82% desktop operating systems. Yet Nvidia isn’t ready to make the desktop versions available for purchase as of publication because it doesn’t believe its worked out some of the kinks, latency included.

“There are still a number of challenges with cloud gaming: mainly the quality of service, the cost of delivery and the latency,” said Phil Eisler, general manager of Nvidia’s GeForce Now business unit.

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Eisler says its approach to cloud gaming has been going on for 10 years already and will likely be another decadelong project.

MarketWatch tested the beta version, playing through the “Farcry 5” single-player game, a first-person shooter with substantial hardware requirements for maximum fidelity. Using the software was nearly as straightforward as watching a film on Netflix. Pick the game from the available library, fire it up and enjoy — just about all of the time. At least for our tests, it was close to playing on a high-end PC, though it still lagged a bit.

Blade’s flagship product, called Shadow, works differently than GeForce Now or EA’s cloud gaming service. Instead of offering a prepackaged streaming service similar to Netflix, players rent a powerful remote gaming computer. Via software for mobile desktop and TVs, gamers connect to the remote machine, which at the moment runs Windows 10. It requires a little more work — installing games yourself, for example — but for $35 a month, grants access to hardware Blade will improve as new tech becomes available.

Shadow is an attractive idea to investors, and Blade has raised more than $70 million in funding. The service has 25,000 users world-wide, Kagan said, and it amounts to 20% of all gaming PC sales in France.

It’s not clear how big the cloud gaming market is, but some industry analysts believe that it could potentially replace consoles, which are a $41 billion global market — should cloud gaming tech squash the remaining bugs, latency foremost among them. France-based game giant Ubisoft Entertainment SA Chief Executive UBI, -0.80% Yves Guillemot said recently that he believes cloud streaming will ultimately eliminate consoles altogether.

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Videogame streaming has the potential to vastly increase the market’s size from the low hundreds of millions of dollars into the billions.

“I think it’s the path of least resistance in gaming and allows players to use any device, anywhere,” Piper Jaffray analysts Michael Olson said. “It removes some of the barriers to entry because it allows everyone to play videogames... There are no negatives to it other than to console makers who are in a position to be significantly negatively impacted.”

At this point, Olson says that aggregating videogame content, much like Netflix does with films and TV shows, will likely be the most successful approach. And as a result tech heavyweights such as Microsoft and Amazon.com Inc. AMZN, +1.43% are best-positioned to take advantage at the moment — because they have strong cloud-computing units and established gaming brands in Xbox Live and Twitch, respectively.

But for gamers who want the very best, it is possible that local hardware will always offer a superior experience.

“In our testing, hard-core gamers are very sensitive to latency and for that reason we think that dedicated gaming PCs or even consoles will still appeal to hard-core gamers for probably the foreseeable future,” Nvidia’s Eisler said. “The benefits of cloud gaming are more around convenience, and so for casual gamers it may prove to be a better option for them.”

Beyond changing how gamers access titles, cloud gaming tech also could mean vast changes in how games are built and the content itself. Moving the bulk of the processing power to massive data centers instead of individual machines scattered around the world, might allow improvement in game mechanics such as creating massive, substantially more interactive virtual worlds. Also, at data-center scale, machine learning and artificial intelligence could be employed in games, giving virtual characters more life or more difficult and evolving challenges.

“I think it’s actually profound, when you start actually digging in and dreaming what you can do when you have near infinite resources at your disposal,” said Moss. “... If you think about the implications for AI and gaming, I think you can’t help but see the huge potential there.”