H.264 Video Backers Try a PR Coup, but It May Backfire

Last Updated Aug 27, 2010 9:06 PM EDT

The fight to control web video -- and to lock in consumers and lock out competitors -- continues unabated. MPEG LA, which licenses pools of patents necessary to implement such technologies as MPEG-2 and MPEG-4, announced that H.264 video streaming on the Internet would remain royalty-free, rather than end on the close of the year 2015.

It sounds like a big concession, but it's actually a PR ploy that won't really change who would have to pay for streaming video. The group used the move as a way to battle Google's (GOOG) attempt to support a rival standard. But what may gain public perception as generosity might also have been a classic business mistake: selling to the wrong audience.

Initially, some sites that focus on Apple (AAPL), which holds some of the H.264-related patents and uses the technology, saw this as a win for Apple and a loss for Google (GOOG), which has tried to promote its own rival WebM technology. But the early looks missed a key point: in this case, free H.264 doesn't necessarily mean free, as blogger Peter Kirn pointed out:

But, boy was it a PR coup, because the words "forever free" starting spreading around the Web, and some people got the wrong idea. You're not free to use MPEG LA's technology as a content publisher if you want to use H.264 as your distribution format for on-demand or for-sale video. More importantly, you're not free to ship H.264 encoders or decoders.That means if you're making, say, a truly free and open source Web browser like Firefox, you can't distribute H.264 support without paying millions for a license or breaking the law. Giants like Apple and Google and Microsoft pay anyway, so it's not an issue for them. But it is an issue for free software developers.
Both Mozilla, which makes the Firefox browser, and Opera Software, publisher of the Opera browser, give away their products. Although a Web site owner might not have to pay royalties for free video, it would for paid video, and such applications as Firefox and Opera would also need licenses.

It's all an attempt to push competing technologies and products out of the way. The move is clearly intended to convince the public that there is no potential downside to using H.264. But there's where the question about audience comes in. No one is paying for a browser, and individuals don't directly pay for the software that runs on web sites. In short, so long as they continue to get what they want for free without the need for wrestling with software, they don't care what the engine looks like.

However, people also aren't likely to change their habits and take up a different browser for vague reasons of "compatibility." They will continue to use the browser they like. That's where the hitch in the PR strategy happened. Because the public doesn't care, reaching them isn't important for MPEG LA. What the organization needs to do is convince web site owners and browser makers to get on board.

Web site owners might be fine with delivering only non-paid video, but many will want to preserve that option. And all of them have to consider browser market share. They can't afford to design their sites for only select portions of their potential audience, and, right now, Firefox alone has an estimated 23 percent market share. That's almost a quarter of users. Even though Microsoft (MSFT) can easily afford an H.264 license for Internet Explorer and both Apple and Google have them, no Web site will potentially want to alienate a quarter of users between Firefox and Opera.

It's so insane, too. The necessary license for either browser company runs $5 million. If controlling and owning video technology on the web is that important, why don't Apple and Microsoft dig into their petty cash drawers and cover the costs? That might quickly get them where they want to go.


Image: RGBStock.com user weewillyd, site standard license.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.