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Commentary: Google Closes On2 Acquisition; Better Check Your Wallet

[This article first appeared on Jan Ozer's Streaming Learning Center blog.]

Late last week, Google closed the On2 acquisition that they started in 2009, and now owns the VP4 - VP8 video codecs. At the time, there was much debate about Google's intent, now most analysts assume that Google bought On2 to open source the codec and let it serve as the basis for the video tag in HTML5. For a good background on the story, check out Cade Metz's Google (Finally) Nabs On2 Video Codecs—Time to open source?.

Interestingly, in my view, if Google donates VP8 to the open source community, it creates more problems than it solves. That's because while the web may (that's "may" folks) go with VP8, the other three screens that we all care about (cellular, living room, device) all use H.264, which is also supported in all major browsers via the Flash, QuickTime, or Silverlight plug-ins. For this reason, for at least the forseeable future, all major web publishers will have to produce their videos in H.264. If Google donates VP8 to the cause, and HTML5 usage becomes prevalent, many web producers will have to produce in both formats, doubling the administration, storage space, and processing requirements.

On the other hand, if Mozilla licensed H.264 for $5 million per annum, 98% of the browsers could support H.264 natively and we'd have a unified codec on all four screens. Microsoft would have to be kicked into the HTML5 fold, but they're already paying the maximum $5 million per annum to the MPEG-LA licensing authority, so it wouldn't cost them a nickel. And if native H.264 support delivers the performance benefits over plug-ins like Flash and Silverlight that everyone predicts, Microsoft would have little choice. Before I started studying the HTML5 issue, I had this impression that Mozilla was a scrappy little startup with few resources and less cash. Nothing could be further from the truth. Mozilla is a cash cow that grossed $83.6 million in 2008 and netted $21 million from operations (http://blog.lizardwrangler.com/2009/11/19/state-of-mozilla-and-2008/). I know their charter dictates that they can't pay for technology, but clearly it's a choice in this instance, not the lack of cash.

If Google donates VP8 to the open source cause, it will cost the web community much, much more than the $5 million it's saving Mozilla in the costs of supporting dual codecs. Since Google's Chrome actually competes with Firefox, it's a move that should have shareholder advocates scratching their heads, but I'm sure Google can come up with many logical reasons to support it.

I'm sensitive to the plight of Mozilla and the much smaller Opera regarding the costs of H.264 support, but it's a dog-eat-dog world, and it would be simpler and cheaper for all web video producers to support one single codec. Google's decision to open source VP8 might be lauded by the open source community, but if it happens, it's going to increase the costs and complicate the lives of all web producers going forward.

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