Google acquires On2

Yesterday Google announced they will acquire On2, a developer of video compression technology. On2 is mostly known for the VP6 codec build into Flash 8 or higher, but it has many more customers such as Skype which uses its codec for powering its video chat capabilities. Because Google declined to explain exactly why it acquired On2, the web is buzzing with speculation.

The most straightforward explanation I read is that it wants to use technology developed by On2 for YouTube which is build around Flash video. This explanation is not entirely convincing, because VP6 is already outdated. Currently YouTube uses the older Sorensen Squeeze codec for normal quality video, but for it’s high quality and HD video it is already moved beyond VP6 and using the industry standard H.264 codec.

How about moving YouTube to a more modern On2 codec such as VP8 which is said to compare quite favourably to H.264? The uncertainty about the costs associated with the use of H.264 may make such a move feasible. At the moment the licensing cost for H.264 is quite straightforward, but the current license is just a temporary license intended to promote the use of H.264. It will expire at the end of 2010 and be replaced by a new license that could potentially become quite expensive for Google. At the moment you need to pay a fixed price for each decoder you ship. While these costs prohibit its use in open source projects such as Mozilla Firefox, it isn’t really a big problem for a giant like Adobe which pays the bills for every Flash player that supports H.264. If Google would have to pay for every video stream watched on its site the operating costs of a site like YouTube could be become quite a bit more expensive.

There is a large obstacle. YouTube is based on Flash and Flash does not support anything other than Sorensen Squeeze, VP6 and H.264. One possibility is to create a video plug-in just for YouTube, but YouTube became popular because of its easy of use. You don’t need to install anything. Most computers have an up to date version of Flash installed and can simply watch the videos without needing to install an additional codec. Moving to VP8 would mean just that. Even if Google would include the VP8 codec with its own browser, most people would still need to install a separate codec to watch videos.

The YouTube HTML5 demo has shown that Google is certainly interested in moving away from Flash and towards the video capabilities of the upcoming HTML 5 standard. There is also a practical problem: there is no standard codec for HTML 5. Apple is using H.264 in Safari and Mozilla Firefox is using Ogg Theora. Google decided to support both in an upcoming version of Chrome, but for a site like YouTube you are still bound to Flash because Internet Explorer does not support the video capabilities of the HTML 5 standard. What if Google would open up the source of the VP8 codec and released it under a royalty free license to the public. This isn’t entirely unprecedented; On2 has already opened up the VP3 codec which is now known as the Ogg Theora codec. VP8 might make a nice standard codec for HTML5. While the announcement from Google doesn’t spell this out, it certainly alludes to this:

Because we spend a lot of time working to make the overall web experience better for users, we think that video compression technology should be a part of the web platform.

During the development of the HTML 5 standard Mozilla has always been in favour of an open and royalty free codec and ultimately has chosen to release Firefox 3.5 with only the Ogg Theora codec and ignoring H.264 altogether. Given the tight relationship with Google I’m sure Mozilla would ship VP8 if it would promote an open video format for the web.

Apple has so far refused to include Ogg Theora with Safari or the QuickTime media framework used by Safari. The reasons are thought to be legal in nature: Apple is a large target and if somebody holds a submarine patent on Ogg Theora, they might wait with litigation until a target like Apple starts using it. This also applies to H.264, but Apple already ships this codec so adding H.264 support to Safari won’t increase this risk. If Google indemnifies Apple from any legal risk it might even convince Apple to bundle VP8.

The only obstacle left would be Internet Explorer, but this could also be solved by convincing Adobe to include VP8 in Flash. They already used VP6 and considered VP8 for including in Flash. At the time they chose not to, because the industry was moving at large to H.264. If that same industry welcomes VP8 instead, I think Adobe would too.

Bottom-line, even if none of this happens, the threat is a nice reminder for the H.264 licensing body to keep its license relaxed and workable in the future. Or else…