The Video Format Wars Begin - Steve Rosenbaum - MediaBizBloggers

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Ah, the truce was so nice. For a moment Flash video was video. It seemed like video was going to play everywhere without any need to have a particular playlist or decoder installed. This moment -- when Apple and Adobe formed some sort of pseudo-secret cabal called H.264 – is now sadly coming to an end.

Before we get too deep into the gobbledygook of codecs and file types and such - let's back up and lay out the powers that be in this space.

First, there's Adobe. Adobe owns Flash, and Adobe is on something like 99% of all desktops, so when Flash video shows up on your computer Adobe is going to play it.

Then, there's Apple. Apple has some sort of stake in the future of H.264 (more on that in a moment). H.264 is a codec that makes video crisp while keeping its file size small. Apple has pushed this standard and made sure that H.264 is the ONLY file type that works on the iPhone, iPod Touch, Apple TV and such. Just recently, Apple made an agreement with Adobe to allow Flash to play H.264 - a complex, not entirely transparent deal. Oh, and of course Apple owns Quicktime too, but that appears to be a non-issue. H.264 matters - trust me on that.

Microsoft has Windows Media (WMV) and of course the almost invisible Silverlight. Microsoft has pushed for a closed codec solution, while Apple has managed to co-op the MPEG-4 H.264 Standard. No one is about openness in this space (unless you count Ogg Theora - a truly open standard that seems little known beyond the uber-geek world).

Finally, there's Google. Google has largely stayed out of the format questions - nicely allowing YouTube to transcode a whole bunch of its library to H.264 so that it could be played within the emerging Apple/Adobe world.

So, H.264 was the winner. Apple was driving its format to all the platforms. And over time, it seemed like that was that.

Meanwhile, off in the corner there was VP7, a competitive encoder (some say a Better encoder) that a company called On2 owned and sold under the brand name Flix Encoder. On2 - formerly known as Duck Corporation for those of us with a very long memory - was a public company that did the bulk of its business building military grade, on the fly, battlefield encoding. In video they were hardly a major player.

Then, surprise. Google buys On2! Yikes. YouTube's papa now OWNS a competitive encoding format to Apple's dominant H.264. And this the very same week that Eric Schmidt resigned from the Apple Board of Directors. Coincidence? I think not. Surely the format battle wasn't the only reason, but part of a larger more competitive atmosphere (Apple had just banned some Google apps from the iPhone App store so it was hardly a love-fest of a week in either direction).

But what does this all mean? Well, as we're not aware of any contract that requires Google to provide YouTube in H.264, we can imagine that Google will begin to push its own format and in small ways begin to slight Apple's dominant H.264. Secondly, H.264 is about to face what some call 'nasty' licensing fees in 2010/2011. The organization that will handle the licensing of H.264 is known as MPEG LA, based - of course - in Denver:

What will it cost to license H.264? Well, this is the best answer I could find:

"In the case of Internet broadcast (AVC video that is delivered via the Worldwide Internet to an end user for which the End User does not pay remuneration for the right to receive or view, i.e., neither title-by-title nor subscription), there will be no royalty during the first term of the License (ending December 31, 2010), and after the first term the royalty shall be no more than the economic equivalent of royalties payable during the same time for free television. In the case of the (b) sublicenses for video content or service providers, the maximum annual royalty ("cap") for an enterprise (commonly controlled legal entities) is $3.5 million per year in 2006-07, $4.25 million per year in 2008-09 and $5 million per year in 2010."


The larger clue is that Google just bought On2 for $100,000 million, so they must know something about the bill that is just around the corner. And it's big enough to get them looking for an alternative codec.

The best article I could find on this subject gives you a clue what Google is looking at:

Keep in mind that given YouTube's traffic, it could instantly be the largest taxable entity in the world for H.264 on December 31, 2010 - and given that YouTube has yet to prove out a significant business model, those costs could significantly impact how that business evolves. Here again, On2 saves the day.

Here's a rational look at the issue from Streaming Media's Dan Rayburn:

And here's another point of view:

So, in conclusion, here's what we know: H.264 will start costing money on 12/31/10. Google has spent $100 million (in stock not cash) to own both VP7 and the future VP8 codec from On2. There's some rumor that says they may 'open source it' (give it away), hence swinging the formats back in their direction. But no one really knows.

More than ever, stay tuned. Web video is fast-moving and thrilling. Hang on.

Steven Rosenbaum is the CEO and Co-Founder of - a fast-growing video publishing platform that powers more than 50,000 web sites, media companies, and content entrepreneurs to aggregate and curate web video from a wide variety of web sources. Currently publishes over 50,000 channels of Curated-Consumer Video, and is working closely with a wide variety of media makers, communities, and publishers in evolving their content offerings to include content created by, sorted and reviewed by community members. Rosenbaum is a serial entrepreneur, Emmy Award winning documentary filmmaker, and well known innovator in the field of user-generated media production. Rosenbaum Directed and Executive Produced the critically acclaimed 7 Days In September, and his MTV Series Unfiltered is widely regarding as the first commercial use of Consumer Generated Video in US mass media. Steve can be contacted at Follow Steve Rosenbaum on Twitter:

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