This is good news. Theora (the open-source video codec whose development Mozilla is supporting with this grant) is mature and there is an irrevocable license to free use of the original patents covering the compression technology, so there's at least a good chance that it truly is "patent-free".
The downside of Theora is that its compression quality is a generation behind H.264 or the latest Windows Media codecs. But web users in general are not sticklers about video compression artifacts: YouTube was for a long time limited to 320*240 video compressed with Sorenson Spark (a H.263 variant of worse quality than Theora), and that didn't hinder its success. If wide support by next-generation browsers makes it possible to start delivering compelling content in Theora, it has a chance.
It seems to be mostly about patents. The H.264 patent pool contains hundreds of patents owned by 23 organizations. Many of them appear generic enough that any new codec would run a serious risk of infringing them. For example, one of H.264's major improvements over previous codecs is the use of arithmetic coding, and there's a patent in the pool concerning a "method and apparatus for binarization and arithmetic coding of a data value".
Worse, there's the possibility of submarine patents that are not included in the H.264 pool. Qualcomm has already attempted to sue Broadcom for making H.264-compliant products that allegedly infringed Qualcomm patents (which Qualcomm had not disclosed when H.264 was being developed). They lost the case, but the US Court of Appeals specifically limited the scope of those patents' unenforceability only to products which are covered by a H.264 license. That means Qualcomm is still free to sue for any independently developed non-H.264 codecs that might be similar enough.
but would people perceive it as being a "low fi" alternative given they are used to the higher quality now? (sure it worked in the past, but we will see).
Mozilla has already committed to native Theora/Vorbis support in Firefox 3.1, and WikiMedia (who will administer the grant) is already committed to using Theora and Vorbis for Wikipedia.
Please spare me the RTFM comments; I am sick and not feeling well enough tonight to dig into some huge research project. I simply would like to know how a company like Youtube functions. Do they have to pay for the right to use their video software or is the software currently available for anyone?
There is open-source software (mencoder) which will convert videos into formats playable by the Flash Player. However, all such formats are encumbered by patents with expensive licensing fees.
Either YouTube uses these formats without a license, or they pay up. They may use commercial encoding software which includes a license, or they may use an open-source encoder and pay for the license separately. YouTube is a big target for a patent infringement lawsuit, so I'd guess they do pay up.
They embed their movies using the Flash Video format (http://en.wikipedia.org/wiki/Flash_Video) which is a container format for multiple audio and video codecs. These are licensed by Adobe, and indirectly to purchasers of their software. Because these codecs are bundled with Flash, to get iPhone support, all the videos had to be transcoded into Quicktime-friendly formats.
Generally, there are licensing fees for each codec (e.g. H.264) which are licensed by software companies for use within their products. The open source implementations of such codecs are in a legal grey area, as technically compiling them means you should pay for their licensing.
A clarification: H.264 videos on YouTube don't use FLV containers. Flash 9 and up supports H.264 in MP4 containers natively. The iPhone app simply streams these directly.
YouTube uses a Flash embed to stream videos from their servers. It's their own proprietary player SWF, but anyone could theoretically create something similar. Flash (the software) contains built-in templates for such a thing.
But this requires the Flash plugin, hence the desire for a <video> element and such (as we'll see in HTML5).
I'm curious -- is it "okay" for Mozilla to bundle their video player in Firefox? Isn't this abusing their large user base to push technologie _they_ endorse?
The funny thing is: If Nokia and Apple hadn't lobbied so hard against Theora (and for their own DRM-laden alternatives), it would now be part of the W3C spec, and Mozilla would be criticized for not having implemented it yet.
The downside of Theora is that its compression quality is a generation behind H.264 or the latest Windows Media codecs. But web users in general are not sticklers about video compression artifacts: YouTube was for a long time limited to 320*240 video compressed with Sorenson Spark (a H.263 variant of worse quality than Theora), and that didn't hinder its success. If wide support by next-generation browsers makes it possible to start delivering compelling content in Theora, it has a chance.