Google Closes On2 acquision – Better check your wallet

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By | 2017-02-23T00:48:04+00:00 February 23rd, 2010|Blogs|Comments Off on Google Closes On2 acquision – Better check your wallet

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. 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.


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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.



#1richSaid this on 02/24/2010 At 12:51 pm

Good point. Will fees for MPEG4 change though? Are the only fees just for the large players?

#2JanSaid this on 02/25/2010 At 08:50 amIn reply to #1

Do you mean MPEG-4 or H.264 - I think they're covered by different agreements. Right now, for H.264, the fees are for anyone that:

- ships and encoder/decoder

- ships content encoded into H.264 that they charge for, either via PPV or subscription. The FAQ does a pretty good job summarizing the license terms - you can download a PDF summary here: If you meant H.264, I'm guessing there are equivalent docs for that as well - just click over to the MPEG-4 program.


#3RichSaid this on 02/25/2010 At 09:56 amIn reply to #2

I was thinking of both. I think most people forget the details, partly because some fees have been waived for awhile. So while Mozilla has some money, it still might be better for everyone that the important common formats, like video, are free to use.

Your main point on the cost of storage of multiple formats is one I haven't heard, but we won't know the true cost of industry choice of h.264 until the lock is in.

#4Jan OzerSaid this on 02/25/2010 At 11:22 am

MP3 is the widest used audio technology and it's licensed as well. I think it's great that some organizations create free stuff, and I use the freeware every day. But we pay for lots of stuff as computer users, computers, applications, entertainment and other content (audible, ESPN insider).

The H.264 patent pool has invested millions of dollars of development cost, if not hundreds of millions. It's licensed in "real" markets like satellite, cable TV, ipods, zunes. Why should Mozilla/Opera get it for free? Why doesn't Mozilla complain about having to buy the computers it uses to build FireFox, or the desks and chairs for that matter. Why don't they complain about having to pay their programmers, CEO or marketing staff? What is it about video technology that makes people think it should be free?

Don't get me wrong; if VP8 is better than H.264 in terms of quality, or even close, AND gets the widespread support that H.264 enjoys in devices, AND become accessible to video producers (e.g. no command lines, in real encoding programs), AND gets widespread playback support within browsers and plug-ins AND is Free, that would be great. But I totally don't get the sentiment that MPEG-LA and the license pool are BAD because they want a return on their investment.



#7Nik LamSaid this on 02/26/2010 At 09:51 amIn reply to #4

There's absolutely no problem with the MPEG-LA getting a return on its investment. I do think, however, it's important for the web to continue on as a medium (mostly) unencumbered by patents. On this basis, H.264 isn't a suitable "standard" codec for the HTML5 video tag.

If a key part of the web is encumbered by patents it will effectively exclude the open and free source community from participating in its innovation and evolution. That might sound inconsequential, but this "community" is largely why we have the internet and the web in the first place.

The software that most of us are familiar with is developed in a "closed" manner, by a focused, well-resourced team, backed by a company. However the software that has lead the way for the internet and the web is predominantly free/open source. While the web is mostly free of patents, people - anyone - can build and enhance open-source software for it (such as web browsers and web servers and even operating systems) without being burdened by the overhead of dealing with patents and licensing. If patented formats became standard on the web, at the very least, it would be a great shame to see this highly productive form of innovation stymied. At worst, it would eventually result in the stagnation and death of the web.

So I think Mozilla is less worried about the $5M and more concerned about the future of the web should H.264 become the defacto standard. If you haven't already read it, Chris Blizzard's recent blog post fleshes this out thoroughly.

Thanks Jan, for discussing this issue.

#5Craig SeemanSaid this on 02/25/2010 At 03:43 pm

Jan, here's some incomplete but probably provocative thoughts and speculation pointing to a different direction.

Given Google Chrome supports HTML5 (and H.264 with it) and Google owned YouTube uses both H.264 in Flash and HTML5 and Google Android is supporting HTML5 and I believe attempt to support some sort of Flash "lite" I wonder where this is all headed.

I'm not sure if it makes sense to take on H.264 at this point unless there's some innovation that wont wreak havoc in the existing codec war (Ogg vs H.264) or the Flash vs HTML5 war.

It may well mean that Google has concerns about MPEG-LA and how that might impact YouTube and/or maybe Android and they think they can introduced a widely supported not plugin based (HTML5) supported codec that wont have the licensing issue that concerns some about H.264.

Another possibility is that they could introduce some sort of service that takes on Skype and that such service would include a high quality codec that won't bring a "shudder" to cell service providers and their network bandwidth. Think of maybe a widely used Google Voice may become a "Google Video Call" competitor to Skype.

While Safari has the Mac well covered with HTML5 H.264 support, with Firefox fighting for Ogg and IE8 only able to use HTML5 video with Google Chrome Frrame, Google has a door wide open to it to compete with FireFox. You think YouTube, owned by Google, starting to beta HTML 5 is a coincidence? Google Chrome can win big on Windows OS with HTML5 H.264. Of course Apple wins big with this vs Flash as HTML5 helps iPhone and iPad.

There may still some symbiosis going on with Apple and Google.

HTML5 H.264 benefits Google Chrome and Apple iPhone/iPad.
On2 benefits Google Android and may benefit Apple iPhone/iPad (Google licensing opportunity) with improved Video calling.

Safari can beat down FireFox on Mac
Chrome can beat down FireFox on Windows.

Google wins big with both HTML5 H.264 in browser war and On2 on smartphones
Apple benefits in this as well and may end up feeding Google's bottom line in the process.

#6Jan OzerSaid this on 02/26/2010 At 09:33 am

Interesting stuff, thanks for posting. I know that Tim Siglin has written that he thinks Google will use VP8 for their own video conferencing effort while open sourcing VP7.

I agree that Firefox's position is perilous at this point. If HTML5/H.264 take off, and they don't support H.264, they could lose share to Google, though I think that Microsoft would add HTML5 support to IE to take share from FF and slow down Google.

At this point, Google's been tight lipped about their plans, but now that the deal is closed, perhaps they'll take some action.

Thanks again for posting - good to see you participating.