Square Enix knows a thing or two about building exquisite CG movies. The company has produced two feature films, and its Final Fantasy games have featured cinematic cutscenes for years. But soon, Square Enix believes it will be able to let you play games as epic and gorgeous as those pre-rendered videos. This week, the firm announced Project Flare, a so-called "technological breakthrough in cloud gaming," which it claims will offer the power of a virtual supercomputer to build video game worlds.

The basic concept is the same as streaming game services we've tried before. Like OnLive and Gaikai, the games actually run on powerful servers miles away. When you press a button, the signal travels all the way to those remote servers, and those computers send a live-streaming video feed of the game back to the player. The amount of time it takes for the round trip typically adds a perceptible amount of lag.

"Gaikai, OnLive, and the other companies were just putting the console in a datacenter."

But lag isn't the main reason streaming games haven't taken off: it's the economics. What doomed OnLive was its inability to scale: the company needed one server for each player, making it little more efficient than just having the same hardware at home. Square Enix believes it can solve that by building games natively for the cloud. Instead of rendering the same game world five different times for five different players using five different copies of the game, the company can just give each player a different window into the same world. Almost all the resources can be shared between players, a Square Enix game designer tells The Verge.

And if all that computing power is focused on a smaller number of games, that means each individual game can be that much more impressive in scope. The company says it thinks it could create real-time battles as epic as those in the Lord of the Rings movies.

"We are working towards active game development."

Unfortunately for gamers, Project Flare is still in an extremely early stage of development, and there aren't any games in the works yet. With this announcement, the company's hoping to attract partners to build games for the platform and suggest how it should evolve. Ubisoft is already on board. Square Enix hopes to start beta tests in the next year or two, starting in North America. It will build cloud games itself, but says the first games will likely just be modified versions of its existing titles with cloud-based enhancements, like the enhanced physics simulations in the Deus Ex: Human Revolution video above.

The company claims it's truly committed to the platform. "This is not an experiment for us," says director of business development Jacob Navok. He says Square Enix believes that gaming will inevitably shift to the data center — it's just a matter of time.