In the end, the following three codecs have emerged as the main contenders for <VIDEO> tag support: H.264, Theora and VP8.
H.264: Microsoft and Apple have been major proponents of the H.264 codec family, which has already been broadly implemented and supported -- not just on the Web, but in cameras, in Blu-ray discs, and many other media that need powerful, efficient compression.
What's contentious about H.264 is not the technology itself but the licensing. H.264's usage is governed by the MPEG LA group, which levies a sliding scale of fees for H.264 based on the intended use. That said, the vast majority of end users on the Web might never pay anything for using H.264, for a couple of reasons.
First, the MPEG-LA has stated that for the next five years it will collect no royalties for H.264 Web streams that are offered free to end users.
Second, in the cases where you're dealing with for-pay content, odds are that the usage fees have already been assumed by someone else. For example, if you're encoding stuff in Windows and uploading it to YouTube as a pay-per-view item, you pay no licensing fees for using H.264, because any costs that might be levied have already been assumed by (in this case) Microsoft and Google.
For additional information on this issue, Ed Bott of ZDNet has explained how H.264 licensing fees work and why it wouldn't be in the MPEG LA's interest to suddenly ratchet up licensing fees when the current free-to-stream provisions for Web playback are up for revision in a few years. Florian Mueller's analysis is also interesting -- he examines the MPEG LA licensing terms from the point of view of an opponent of software patents, noting that the MPEG LA's licensing scheme, while not an ideal arrangement, does serve a useful function in a world where software patents exist and must be acknowledged.
That said, companies like Mozilla have not been set at ease -- for example, according to Mike Shaver, vice president of engineering at Mozilla Corp., MPEG LA's licensing isn't flexible enough to make solid exceptions for free software. Mozilla has opted to support Theora/Vorbis directly in its Firefox browser (and will support WebM in Version 4.0), and it has no plans to add native H.264 support.
Theora: Free software proponents have advocated the open Theora video format (with its matching Vorbis audio codec), which requires no licensing fees at all and has implementations immediately ready to use. But Theora has been criticized on a number of grounds: It isn't as technologically advanced as other codecs; there isn't much material encoded in the format, so current video would have to be recoded; and Theora's patent status could be subjected to future legal challenges (something Steve Jobs has hinted at).
VP8: A more evolved version of the Theora codec family (they share common ancestors), VP8 was developed by On2 Technologies, which also created one of Flash's video codecs. Google has since purchased On2 outright, and while Google now owns the patent for VP8, it's allowing unrestricted use of the codec without licensing fees under the banner of "the WebM Project." (WebM is Google's name for VP8 video plus Vorbis audio.)
This makes VP8 sound like a sure thing, but there are two problems. The first is that there are serious questions about how polished the spec is -- a factor that has serious implications for, say, hardware devices that shoot video directly in VP8. If VP8 is going to be in flux, then cameras that shoot video in VP8 would need to be firmware-upgradable (and have updates published by their makers) to use newer, better performing versions of the codec.
Another problem is VP8's quality and compression efficiency compared to H.264. One analysis, by Jason Garrett-Glaser, a developer on the FFmpeg project, has put the quality of VP8 on a par with H.264's "baseline" spec -- in other words, good but not great, and with H.264 way out in front in certain respects. He also believes that VP8's spec relies way too much on the snippets of code provided by Google. Most specifications for a standard (like the <VIDEO> tag itself) are drafted and discussed in depth before a single line of code is written; in Garrett-Glaser's view, the only real VP8 spec we have right now is the code, a cart-before-the-horse situation.
How to add HTML 5 to your site
The codecs you choose as your starting defaults should be dictated at least in part by what browsers are run by the majority of your visitors. Mark Pilgrim's Dive Into HTML 5 site has a detailed dissection of the competing and conflicting codecs, and it includes a handy chart that describes what current and next-generation browsers will support. Chrome is way out in the lead: The upcoming Chrome 6 will support all three major families of codec out of the box. As mentioned before, Firefox will support WebM in its upcoming Version 4.0, and it supports Theora, but not H.264, in Versions 3.5 and up. The most recent Internet Explorer 9 Platform Preview plays back H.264 natively; support for other codecs will most likely only be available as add-ons.
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