Amazon is readying a game console/set top box of its own, and we’ve learned from multiple sources familiar with the device that the Lab126-produced gadget will have a form factor similar to the Chromecast, or in other words it’ll be a stick or dongle as opposed to something like the Apple TV. In addition, one source claims it should have support for streaming full PC game titles, and as such might be able to compete with consoles including the Xbox and PlayStation, instead of just Android-powered living room game devices.

The stick form factor is not a surprise, given that Roku has just launched its own device using the same design, and the Chromecast has done so well in terms of attracting buyers. But the interesting component could be the way the gadget approaches gaming. Streamed PC titles is in keeping with some of what we’ve heard before in whispers around Amazon’s efforts, and makes sense given that the company sells digital download titles for PC and Mac direct from its ecommerce website.

These streaming efforts will be more akin to the remote game service offered by OnLive, than to the local streaming that Nvidia offers through its Shield Android gaming console and Nvidia-powered gaming PCs. The titles, which are said to be top-tier games, will be streamed from Amazon’s services at 30fps (which is comparable to most online video) according to our source.

OnLive was acquired by Lauder Partners, in a deal that was designed to relieve its financial troubles. The company had racked up considerable debt during the course of its operations, which were cost-intensive in part because of the need for it to establish high-capacity servers across the country to provide its service. Amazon has a big head start: It already manages huge server farms to power its digital content and cloud service offerings.

Offering streaming gaming would provide a huge competitive advantage over its rivals in the set top box space, both large and small, and OnLive’s failure wasn’t due to a lack of demand, but due to the high cost of operation and lack of ability to scale. Plus, if added in as an Amazon Prime member benefit, the e-commerce company could have yet another incentive to get users on board with its premium product. Plus, it could plug into the recently leaked Amazon gaming controller, despite the fact that the device is said to be sold independently of any set top box and compatible with Kindle Fire tablets, too.

We’ve heard conflicting things about what exactly would be included in an Amazon set top box, but it seems likely the company would use it to promote its streaming Amazon Instant Video and Amazon MP3 offerings. The gaming piece looks to be something that could offer a considerable advantage over the platforms of its rivals, and perhaps put Amazon into more direct competition with Steam, as well as major game console makers. The device is still in testing, however, so we’ll have to wait and see what emerges in terms of features included in the final version.