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June 7, 2010

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To Be Free, or Not to Be. Does VP8 Limit Revenue Potential for GoogleTV?

There is a wave of reaction and analysis around the Google TV and VP8 announcements, and I hope this doesn’t simply add to the noise level.   From the point of view of revenue security, I get the impression that rather than uniting the world behind a common (OK, supposedly free) codec, Google is really driving a wedge between commercial content and user-generated content (or at least not fee-based content).   Why do I think so? VP8 is not suitable for revenue generating video services because Google believes that "DRM is fundamentally in conflict with open source and open standards." As a result, commercial content will continue to be distributed using standards that are compatible with protection techniques such as MPEG-2 transport stream and AVC coding. Non-commercial content may use the VP8 open source solution. Google is doing the same thing with YouTube - converting user-generated free content to VP8 while using Adobe Flash for paid content. But in reality, these two worlds are really not exclusive as they might seem.

Some content may start as paid content, and later on may be distributed in the clear with commercials and eventually distributed freely. Other business models allow users to chose between paid but ad-free version or ad-supported version of the same content. Content providers or service operators are not likely to transcode each content for different distribution models if they can avoid it. As a comment on Google’s apparent position here, I don't see why an open source codec or open standard should be fundamentally incompatible with revenue generating services. This has been disproved by several standards organizations including MPEG, DVB or OMA, but that is a discussion for another day. The bottom line is that if valuable content will eventually be encoded and distributed using VP8, we'll be able to protect it if the business model requires it (it is open source after all, isn't it?) Read on NewTeeVee why open sourcing VP8 matters. The other issue in debate is whether open source VP8 will stay free. It is unlikely that after a quarter of a century of digital video compression research, Google (or On2) would be able to come up with a codec that is of comparable quality as those developed by MPEG/ITU without infringing on anybody's patents. If I remember correctly, Microsoft tried something similar with VC-1 and it did not work according to the original plan. I don't believe that any serious service provider will jump on the VP8 bandwagon without being able to accommodate all licensing fees into their business model upfront.  Maybe this will speed up MPEG's effort to create a royalty-free version of MPEG codec, which will avoid splitting the pay-TV and free-TV worlds. I guess we will wait and see . . .

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