Seems (according to one, at least) many shareholders were against the merger, but the corporate leadership managed to push it through.

1. They're currently in the red.

2. VP6, their only successful product in recent years, is obsolete.

3. Neither VP7 nor VP8 is competitive with the best H.264 encoders, nor do they have the clout to get hardware implementations out there. They will serve--at best--as niche formats, like Bink. VP7 got practically no adoption--the only notable licensee I know of is Skype video chat. As VP8 is basically just a faster, pared-down VP7, I doubt it will do much more for them.

Most importantly, proprietary video and audio formats are simply hard to pitch nowadays. Nobody wants to use file formats that depend entirely on the implementations and support of a single company; it's simply too risky. The only proprietary format I can think of that still has wide adoption for reasons other than legacy is Bink, due to the low licensing costs, good reputation, top-quality tools, and cross-platform availability. And, of course, the fact that games are usually release-once-and-forget products, maybe with a few bugfix patches on the side.

(Note "professional" video and audio stuff is its own world, and has a huge variety of almost-entirely-proprietary stuff, like ProRes, etc.)

4. Their last code release, VP3, while quite outdated, is a great example of utterly atrocious code, which doesn't say much for the quality of the rest of their code, or the capability of their programmers.

I found the fact that their shareholders asked for more utterly hilarious.

Now, what's Google going to do with them? That's an excellent question. VP3 was adapted to create Ogg Theora. Google has committed pretty strongly to supporting HTML5 and open standards for the HTML; they support both Ogg Theora and H.264 in Chrome, and serve up H.264 on YouTube. There isn't, however, a viable cross browser codec as Mozilla and Opera refuse to support H.264 and Apple and Nokia refuse to support Ogg Theora (and Google won't host video in Theora, as the video is too big at acceptable quality levels).

So, I'm wondering if Google is planning on making VP6, 7, or 8 an open standard, freely licensed unlike H.264 so it could actually be viable cross browser. It's still an uphill battle, as you don't have hardware support yet, and need to convince the other browser vendors to go along, and it's a lot of money to spend to just give away for free. On the other hand, Google really does seem to believe in promoting open standards, and has been spending a lot of money on free software supporting open standards, such as Chrome, and as you point out, it's tough to make money on proprietary codecs by now, so I'm really quite interested to see what happens here.

Chris DiBona of Google made that claim about Theora on the WHATWG mailing-list, but it turns out that Theora can produce nicer video than H.264 at the bitrates YouTube delivers:

http://people.xiph.org/~greg/video/ytcompare/comparison.html

Of course, it's quite possible that Theora is more processor intensive than H.264 for an equivalent bitrate, but in raw quality-per-byte Theora is perfectly usable for YouTube-quality video.

http://web.mit.edu/xiphmont/Public/theora/demo7.html

Check out the last graph on the page. As they point out, PSNR isn't a 100% unbiased way to compare codecs. However, the graph, made by the theora developers themselves running the bleeding edge encoder on content of their choosing, clearly shows that Theora requires 50% larger files to produce the same PSNR as H.264.

The point is, neither Theora nor H.264 can actually be standardized on for now, for a variety of reasons. Maybe the reasons are good, maybe they're bad, but several of the most significant companies involved refuse to support one or the other, and can't be convinced otherwise.

A new, royalty free, open standard codec might help break the deadlock. As I said, there are still hurdles, like the hardware support issue, and the substantial cost to Google when it's already invested in H.264. But I'm just not really seeing Google in the business of selling proprietary codecs, so I can't really see why else they would buy On2.

It explicitly disclaims that the only reason Theora won was because of Youtube's utterly awful H.264 encoder--which they have since replaced with x264 for exactly that reason.

gmaxwell, one of the Theora devs and the author of that post, has personally requested that I bonk every single person who makes any claim as to Theora being nearly as good, equal to, or better than H.264, because such claims create expectations which they know they cannot possibly reach. The single worst thing people can do for Theora is to market it based on false claims.

Therefore, BONK.

Not quite true. Google pays Mozilla $50m/year; the maximum licensing fee cap is less than 10% of that.

(nor the bloggers and other typical Web users for encoding and uploading H.264).

Uploading and encoding H.264 is free. If you distribute more than 100,000 encoders, you have to pay 20 cents each.

a) 10% would appear to many people, I believe, to be a fuckton.

b) Mozilla makes free software. They have obligations to downstream distributors.

Is it possible that that Google will benefit from this merger by pushing VP8 (assuming thats their best/latest codec) as a standard and open codec as an alternative to Theora.

Not sure if I am comparing apple to oranges so feel free to correct me.

Zero. Internet broadcast is free until at least 2016. They might pay a per-encoder fee on the server-side, but this is likely negligible (20 cents each).

Now, the fees they pay for Chrome may be significant, though we don't know if they negotiated a better deal than the publicly available license. If I recall correctly, the license cap is around $4m/year for H.264.

Doesn't the RAND (Reasonable and Non-Discriminatory) nature of H.264 licensing make this impossible?

Hantro info: http://www.on2.com/index.php?319

On the other hand On2 announced the deal with "Google and On2 to Improve Video Quality on the Web" and Google's title was "Innovation in video on the web" and used phrases like:

"Today video is an essential part of the web experience, and we believe high-quality video compression technology should be a part of the web platform," said Sundar Pichai, Vice President, Product Management, Google. "We are committed to innovation in video quality on the web, and we believe that On2's team and technology will help us further that goal."

http://googleblog.blogspot.com/2009/08/innovation-in-video-o...

So draw your own conclusions but I think that's some fairly heavy hinting from Google. Of course that was before MPEG-LA dropped charges that would have cost Google about $25 million over the next 5 years and generally held back video on the web so you could put it down to sabre-rattling.

edit: Also it's not the only way past the current impasse. The MPEG patent holders could release a patent-royalty-free subset. Not a total win for free software folks, winning the battle like that could lose them the war but it would perhaps suit Apple as it would probably match what they support in iPhones anyway. Google and Apple apparently have already tried to broker a deal and got rebuffed but maybe Google have more leverage now.

http://en.wikipedia.org/wiki/Flash_Video#Codec_support

Facebook used to use VP6 before they switched to x264--from what I recall hearing in my time there, the On2 software was a disaster. Unreliable, slow, and overpriced--$1500 per core per year!

From my experience, the primary reaction of many companies to the announcement of Flash H.264 support was not "yay, we can save bandwidth with H.264", but rather "oh god now we don't have to deal with VP6".