On2's Take On Adobe's Flash Video H.264 Announcement

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Includes: ADBE, ONT
by: Dan Rayburn

As you know by now, on Tuesday Adobe announced their support for H.264 for the latest version of their Flash player. While I saw many blogs and news sites that covered the announcement, most didn't really provide any insight or analysis into what this announcement by Adobe means for the market. The best posting I saw was on a blog from one of the engineers at Adobe (NASDAQ:ADBE) who works on the Flash player. If you really want to know the technical details, it's the one post to read.

In the spirit of not just re-hashing a press release on my blog like so many other sites do, and since a few bloggers already gave the same analysis I would have, I decided to ask Bill Joll, On2's CEO, for his take on the announcement and what it means for content creators as well as his company, which has a big stake in the Adobe Flash platform.

While Bill thinks the announcement is a step in the right direction for Flash video, he correctly points out that many times one technology does not replace another. In some scenarios, H.264 make work out to be the best solution, but at other times, On2's (ONT) solution would trump H.264.

Bill says that while there are certain markets for which standards-based codecs are important, there will always be an opportunity for On2's state-of-the-art proprietary technology as well. H.264 can be very expensive if you want to distribute millions of encoders for applications like video chat or user-generated video publishing. In addition to licenses and fees to acquire an H.264 software development kit [SDK], a second intellectual property [IP] license is also required from MPEG-LA. And the same is true for the new AAC+ audio standard in Flash, which requires a separate IP license from Via Licensing in addition to a SDK license. Additionally H.264 is a fairly complex codec that requires significant CPU cycles for encoding and playback, especially for HD content. For these reasons, Bill says there will continue to be a strong market for VP6-based Flash video in the coming years.

That being said, On2 understands that there are certain market segments for which broadcast-industry standards are and will always be a requirement. The video industry is moving towards higher definition video and longer form content that requires lower power and higher performance along with the consumption of video anywhere. This translates into a requirement for any video on any device, but it also means that video coding blocks are moving more and more into hardwired implementations. For On2, they see the value in being able to support their own technology as well as standards in the market.

The news that Adobe is adding support for H.264 and AAC+ to Flash is something that Bill says On2 is well prepared to support. He points out that in May of this year On2 announced that they were planning to acquire Hantro, a Finland-based company with some of the best hardware implementations of audio and video codecs anywhere, including H.264. The Hantro acquisition, which is still pending, does two things for On2:  first, it provides a vehicle for hardware-specific versions of their industry-leading TrueMotion video technology, including VP6, VP7, and future codecs currently in development; and, as important, it propels On2 into the market of providing industry-leading implementations of standards-based codecs such as H.264, VC-1 and MPEG-4. In that regard, Adobe’s and On2’s announcements both echo the same base message: both companies are expanding their available market through support of standards-based technology.

Bill says that On2 is committed to two business tracks going forward: continuing to invest in their industry-leading proprietary video compression technology; and embracing standards in a way that will allow On2 to become the leading provider of codecs – any codecs – for any and all applications. On2 is fully committed to supporting the new H.264 and AAC+ Flash formats in their entire family of Flix encoding tools and SDKs which they announced this week. Bill points out that in some cases, these are free upgrades that will protect their customers’ investment in their products and he says On2 will give their current and future customers the option of supporting any and all technologies, whatever their needs may warrant.

When it comes to the ecosystem for online video, no one solution works best for every type of content customer. This holds true for compression, hosting, delivery, content management and many of the other technical pieces that make up online video. One format, codec or bitrate is not going to replace another and we'll always have multiple choices in the market based on the fact that customers all have different needs in different industries and verticals. While Adobe's announcement of support for H.264 is a step in the right direction for the industry and for content creators, in my eyes, it does not have a negative impact on On2 or their business as many may speculate.