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Applesoft, Ogg, and the future of web video

Will the real open codec please stand up?

Nice little business you got there...

"Open standards and freely usable formats for web content. We don't like turnpikes on the web," Lie said. "Software patents are a pest, and they raise the cost of the web - either by charging fees, or by forcing developers to navigate through patent minefields."

How much money are we talking about?

If you want MP3, you have to pay Thompson, which helped create MP3 along with three other companies. Decoding costs $0.75 for a patent and software license per unit, but if you want to encode the media - which, of course, you have to - then that's priced at up to $5.00 per unit. On consumer devices where margins are tight and prices competitive, that can hurt.

H.264 is administered by MPEG LA, which collectively represents all the companies whose patented technologies are contained in the codecs. MPEG LA charges PC makers, TV manufacturers, other OEMs, and online service providers to employ the codec technology.

MPEG LA charges OEMs according to how many units they've shipped in a year. Ship less that 100,000 units, and the manufacture doesn't pay. But if you ship more than 100,000, it's $0.20 per unit each per year. And if it's more than five million, then the price is $0.10 per unit each year. Royalties go up to $5m for 2009 and 2010.

Cisco Systems is an H.264 licensee because the Flip video camera plays video using the codec, and service provides like Netflix pay their own MPEG LA fees. If you stream video online and charge via a subscription, then you pay according to how many subscribers you have. If you have less than 100,000 in a year, then H.264 is free. But if you have more than one million, you pay $100,000.

And though prices can change. If one codec dominates the industry and a handful of companies control it, they can then dictate terms that put people out of business.

"H.264 has had a fresh impetus from Apple's iPad... The iPad, like the iPhone and OS X, uses iTunes which is powered by Apple's QuickTime player that runs H.264"

Montgomery recounts his personal experience, which led to the formation of Ogg Vorbis. In 2001, Montgomery worked for Green Witch, an online company that competed with Music Match. Fraunhofer, one of the MP3 patent holders with Thompson, bought a stake in Music Match and charged Green Witch $60m to license MP3 for the year. Green Witch couldn't pay and was sold to a company that owned another web radio provider, iCAST. Ogg Vorbis was created to escape the MP3 noose and avoid a repeat of history.

"That's how Ogg Vorbis got started," Montgomery said. "They said we need this real soon."

Meanwhile, H.264 is at a transitional moment. The first version appeared in 2003, but its only recently gained momentum. Three of the tech industry's most influential companies in software and graphics are helping establish H.264. There are Apple and Microsoft, who helped build H.264 and charge you via MPEG LA to use the codec - and then there's Adobe Software, maker of the ubiquitous Flash player, which also uses H.264.

Microsoft's browser-based media player, Silverlight, adopted H.264 last year, and the next version of Internet Explorer, IE 9, will use only H.264 to play HTML5 video. Silverlight is on 60 per cent of all devices on the internet - up from 45 per cent in November 2009, according to Microsoft. And while IE's overall market share is falling, the Microsoft browser still commands two thirds of the market.

H.264 has received a recent boost from Apple's iPad too. The iPad, like the iPhone and OS X, uses iTunes, and iTunes is powered by Apple's QuickTime player, which runs H.264. Apple's official browser for the iPad and iPhone, Safari, also uses H.264 for HTML video. To give you an idea how fast the iPad could move, the iPhone has nailed down a quarter of the US smart-phone market in less than three years since it was released.

Meanwhile, Adobe added H.264 to the latest edition of its ubiquitous Flash Player. Adobe claims Flash runs on more than 90 per cent of the world's PCs. The company has also revealed that it's adding H.264 hardware decoding to Flash for Macs.

So far, Microsoft, Apple, and the other H.264 patent holders do not collect a license fee from service providers who deliver video for free. That means a massive free pass for companies like Google with YouTube, home to around 100 million videos, with a reported 1.2 billion streams each day.

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