On2 is the company that open-sourced VP3, which has been further developed and it's now known as Theora. "In June 2002 On2 donated VP3 to the Xiph.Org Foundation under a BSD-like open source license. On2 also made an irrevocable, royalty-free license grant for any patent claims it might have over the software and any derivatives, allowing anyone to use any VP3-derived codec for any purpose. In August 2002, On2 entered into an agreement with the Xiph.Org Foundation to make VP3 the basis of a new, free video codec, called Theora."
Now that browsers have native support for playing videos, many wondered what is the best video format for the web. Firefox, Opera support Theora videos, Safari plays H.264 videos, while Google Chrome supports both formats.
"Although the h264 codec has gained dominance due to its excellent compression and broad support in the consumer electronics ecosystem, it is covered by patents that preclude broad royalty-free usage. (...) Ogg [Theora] may offer advantages from a licensing standpoint, but there are still many unanswered questions about its quality and suitability for Internet video streaming services," explains Ars Technica.
Open-sourcing VP8 could solve the problem, although it could take years until Google releases the code and browsers start to support the new format. Despite all the hurdles, it's rare to see a company that pays more than $100 million to open source a video codec.
"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 Google's Sundar Pichai, when Google announced the On2 acquisition.
Here's what the Free Software Foundation wrote in an open letter to Google:
"With your purchase of On2, you now own both the world's largest video site (YouTube) and all the patents behind a new high performance video codec -- VP8. Just think what you can achieve by releasing the VP8 codec under an irrevocable royalty-free license and pushing it out to users on YouTube? You can end the web's dependence on patent-encumbered video formats and proprietary software (Flash)."
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