No they didn't, that was simply a bandwidth issue, we've been streaming video since TV was invented and with the right equipment you could stream video over the internet before the web even existed. No equipment exists that can alter the fundamental speed limit of the universe.

Video isn't interactive.

Yep. This is the kicker. For streaming videos, only bandwidth matters but for video games, both bandwidth and latency matter.

Reminds me a bit of the 30/60 fps fights a few years ago. Sure, 30fps games look more "cinematic" and 60fps movies look uncanny, but 30fps games feel less responsive.