Google and On2 Technologies jointly announced today that they have entered into a definitive agreement under which Google will acquire On2, a developer of video compression technology. The acquisition is expected to close later this year. On2 markets video compression technologies that power high-quality video in both desktop and mobile applications and devices and also holds a number of interesting patents.
Some of its codec designs are known as VP3, VP4, VP5, TrueMotion VP6, TrueMotion VP7 and VP8. Its customers include Adobe, Skype, Nokia, Infineon, Sun Microsystems, Mediatek, Sony, Brightcove, and Move Networks. On2, formerly known as The Duck Corporation, is headquartered in Clifton Park, NY.
Under the terms of the agreement, each outstanding share of On2 common stock will be converted into $0.60 worth of Google class A common stock in a stock-for-stock transaction. The transaction is valued at approximately $106.5 million.
According to the release, $0.60 per share represents a premium of approximately 57% over the closing price of On2’s common stock on the last trading day immediately prior to the announcement of the transaction, and a premium of approximately 62% over the average closing price of On2’s common stock for the six month period immediately prior to the announcement of the transaction.
Important to note is that On2 once had a market cap in excess of $1 billion at its peak, after going public on the American Stock Exchange in 1999 following a merger with Applied Capital Funding (which was already listed at the time). Before its entry on the public market, The Duck Corporation had raised $6.5M in venture capital funding from Edelson Technology Partners and Citigroup Ventures.
Back in 2001, On2 made waves by releasing their VP3 compression technology to the open-source community, including their patents on the technology. The technology lives on in the form of (Ogg) Theora. You can find more information about this here.
The agreement is subject to On2 stockholder approval, regulatory clearances and other closing conditions.
Google is reluctant to dive into specific regarding the product plans until after the deal closes, although it’s conceivably related to its immensely popular video service YouTube.
In a blog post, the company says:
“Although we’re not in a position to discuss specific product plans until after the deal closes, we are committed to innovation in video quality on the web, and we believe that On2 Technologies’ team and technology will help us further that goal.
We’ll update everybody when we’re able to share more information. In the meantime, nothing will change for On2 Technologies’ current and prospective customers.”
If would be great if Google decides to open-source On2’s VP7 and VP8 video codecs and free them up as the worldwide video codec standards, thus becoming alternatives to the proprietary and licenced H264 codecs. On2 has always claimed VP7 is better quality than H264 at the same bitrate.
Also noteworthy: Google could use the VP8 codec for YouTube in HTML5 mode, basically forcing its many users to upgrade to HTML5-compliant browsers instead of using Flash formats.
Smart move by Google, and possibly great news for innovation in web-based video viewing.
Expect updates if and when we learn more.
Youtube going to be more faster?
Hopefully Youtube video quality will improve with this.
good trade-off for Google
Sometime back I read a report that states Google spends more than $350+ millions on youtube Infrastructure costs which could run to half a billion this year so Looks like Google want to optimize on the bandwidth costs part it is incurring for running Youtube
may be using this tech, my personal view it is good for Google.
Are they going to start compressing youtube video among others? Probably. Good purchase though. Way better than buying feedburner.com for 300 million.
The bulk of YouTube videos are in either h.264 or On2 VP6 via. Adobe Flash. In 2010 dot com sites using h.264 will be under intense pressure as they navigate the licensing issues with that specific codec. For Google this is absolutely brilliant; gives them their “Quicktime” but also the ability to dramatically set the standard for online video codecs.
Why does everyone think youtube uses vp6? It’s never been used on the site except for the brief window when you could trick youtube into not re-encoding your video.
Youtube uses Sorenson Spark, a subset of H.263, and H.264 exclusively, except for some some sponsored channels where the sponsor is allowed to encode their own videos.
On2 makes the VP6/7/8 Codecs – this gives gooogle a way to avoid h.264 licensing fees as On2 VP8 works well on mobile devices, has comporable quality, etc.
This could change the world if they open source it, and give the vp6 patent license to everyone!
The on2 codec is also part of the JavaFX SDK
‘You tube’ will have “Better video compression technology” and the whole world is going to enjoy a faster and better videos. On2’s interim CEO Matt Frost said, he was thrilled with the deal, which is expected to close in the fourth quarter.
Skype need to pay Google to use VP7 from now on
“On2 has always claimed VP7 is better quality than H264 at the same bitrate.”
That’ll be the day…
On2 contributed one of their earlier codecs to the Xiph.org foundation. That codec became what is today Ogg Theora. Let’s hope Google gives Ogg Theora another shot in the arm
That’s something that got me wondering. Ogg Theora looked to be the best potential format for tags in HTML5, however there are fears from Apple that it’s not as “free” as some would hope and there are underlying copyright issues that could pop up later on. This might go some way to assuring those fears, Google now owns the source and can review it, and they’re not a likely company to go suing for licesnsing fees when their best interests lie in keeping web content flowing.
There is FUD from Apple that there are unspecified and unspecifiable patent issues. This is completely unsubstantiated rubbish at this stage. Theora is by far the codec freest of patents currently known.
The problem is that Apple want an owned and controlled world, so they’ve been spraying unmitigated BS about Theora.
Actually the main reason that Apple has rejected Ogg Theora, besides “submarine patents,” is that there is no hardware decoders for Ogg Theora, which Apple can use in their mobile products (iPod, iPod Touch, iPhone). h.264 has readily built and available hardware codecs that they can buy and use – and they do. However there is no hardware codec for Ogg Theora, or no plan for that matter to get a chip builder to build one. No hardware codecs, means that Ogg Theora has to be decoded in software which is highly CPU intensive and doing that is just unfeasible on a mobile device with a limited battery capacity.
h.264 can have submarine patents as well, but with MPEG LA being the sole licensor at the moment, they will be the ones who have to go through the potential litigation, not Apple, Google, Microsoft, Adobe, etc.
“Also noteworthy: Google could use the VP8 codec for YouTube in HTML5 mode, basically forcing its many users to upgrade to HTML5-compliant browsers instead of using Flash formats.”
Nope.
It’s important to note that Google has said previously that it WILL NOT distribute YouTube videos in Theora, citing reasons such as lower quality than H.264 and patent concerns.
Maybe VP8 becomes the new Theora?
I can see YouTube videos increasing in quality very soon from this. I’m sure it is something they have wanted to do.
Exactly, i think google do not want to pay so much on H.264 lisence fee.
If this deal will finally make, i can not imagine what’s gonna happen to the video codec standards in the future.
wow thats a lot of money
Charbax – or alternatively if they don’t open source anything then we’re back to 90’s video hell, where you need to supply 3 alternative file formats per video clip to satisfy different browsers/OS. A Chrome only implementation of vp8 would only increase the fragmentation and polarisation of video codec use that we’re already seeing with different browser vendors approaches to the video tag.
Flash will still have many advantages over the video tag in that it has far more fine grained control, codec versatility, integration of true streaming, UI, and advanced functionality than you’re likely to achieve with purely html alone.
Have you read the spec for the video tag?
I think it addresses all of your vague concerns.
Excellent purchase Google.
I wonder what this might mean for FlixCloud. I was considering using their transcoding service.
Looks like this acquistion is to get rid of On2 codecs from the web which is good thing. Google is already embracing open standards H.264. It is slowly changing the video encoded in youtube to H264. RIP VP6, VP7, VP8 ….anyway they were not better than H264
On the contrary, this is to provide the web with better alternatives to proprietary codecs. Owning the company, all On2 codecs can thus be open sourced and licence free.
H264 costs Google a lot of money to licence for HD videos on Youtube. Using it’s own free open source codecs in HTML5 video tags, Google can save millions of dollars in licencing costs to H264 consortium and to Adobe for Flash.
Not only saving money on codecs licencing, also creating a system for video that will work much better on all devices, including all the phones and open-source devices that have problems playing back Flash contents.
H.264 is capped at $5 million/year through next year. There may be some uncertainty about where it goes after that, but right now its way, way cheaper for google to use H.264 than to buy On2 for $109million.
But come January 2011 that will all change — distribution and encoder costs will apply. Do you really think MPEG-LA would just sit by and not want to get a bigger piece of the Google pie? It’s an incredibly smart move by Google. Let’s just hope they “Do no Evil” and open up the codecs.
Google appears in practice to have given up on “Do No Evil” – particularly in regard to video codecs, their maxim appears to be “Don’t Go Very Far Out Of Your Way To Do Evil, But If It Just Sort Of *Happens*, Well, Hey.”
Witness the FUD about Theora from Chris DiBona on the WHATWG list, and how he suddenly vanished when it was utterly refuted with proof. Haven’t heard a peep from him since.
Particularly in regard to video, I recommend trusting Google precisely as and when they actually do something trustworthy. A vague “Do No Evil” has proven worthless in practice.
This is actually awesome news for anyone that has delved into encoding their own video for web use… FLV has almost been the only real option, even though it sucks donkey balls.
ON2 wanted something stupid like 3500GBP per CPU for encoding to VP6 last time I checked – which is impossible to scale to any kind of level where it would be worthwhile.
Like you say, hopefully Google will open source VP6/7/8 now and then we should see some interesting startups emerging. Sites like encoding.com will suffer though as more people start to roll their own encoding farms.
Interesting times.
This will change the street for ever, The thought that the human right to sight and sound will be liberated in this deal is major,
Who in their right mind wants to license sight and sound. Hopfully google will release there own video player plug-in and improve the codec as well.
This leaves flash/silverlight in an intenable position with their licensing structure, at best it leaves them holding on to DRM. This deal has a Carl icann effect for the competition.
Does anyone know MPegLa’s stock code? time for a short (plunder) position, I thinks…
Personally I was going of google but if they liberate sight and sound then I will be a life long fan.
You obviously haven’t read YouTube’s EULA have you?
I use ON2’s desktop version of Flix for my cartoon encoding and really like the results. Packing a 2GB AVI into an 8MB FLV is always impressive.
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It has been a good while since we have heard of any large buyouts from Mountain View. I can easily see this purchase being motivated as (mentioned above) to streamline their YouTube infrastructure. But also to extend the pervasiveness of their existing technologies to those who have lower bandwidth (ie rural areas and mobile devices).
It looks like 2009-2010 will be a major clash between Google and Microsoft!
Since I own a copy of Flix I got an email from ON2 about the acquisition. Here’s part of the email:
Why do people think this will open up online video? Google just bought the rights to the ONLY alternative codec capable of high quality video playable in the Flash player. Everyone here seems to assume they’ll open source it. Why, exactly, would they do that? On2’s posts and email give no indication they plan to renew licenses beyond their current term or provide products to anyone other than Google. If you’re a YouTube competitor who uses On2, you better be scrambling to build your own h.264 encoding farm.
Haven’t you heard? Google isn’t evil…
Brilliant is they open source the codecs. Even better if they improve Ogg Theora.
Otherwise, a real pain.
err… if*
wow… the famous O2 is under Google now…
What does this mean for On2 share holders??
What if the share raises 50 % again tomorrow, is it better to sell them or wait for the google deal to finalize in the fourth quarter??
There’s already a superior to h264 compression format from BBC, called Diract.
http://diracvideo.org/
Oh, it’s free and opensource already, just doesn’t have recognition, yet.
and the proof of dirac better than h.264 is?
Don’t blame H.264 for the low quality of YouTube’s videos blame Google for setting such low quality standards in the first place.
The videos uploaded to YouTube are of good quality but the processing that YouTube does kills the quality.
the low quality videos on youtube are sorenson spark not h.264
=)
I use On2 for rendering video to FLV before uploading to online video sites because:
* it saves upload time, due to the high degree of compression
* very little quality is lost
as more people use 720P (like mino FLIP) and larger native formats in their video cameras, speed with quality becomes more important than ever. Long before one worries about how to encode the content that has been uploaded to the streaming platform, you have to address the upload preparation process. Otherwise, you’re kidding yourself about the gain.
http://richread...r.blogspot.com/
If ultimate control of On2 and their tech is so important (and I think it is for many of the reasons identified above) to Google and others for not only the US but Asian (On2 tech big in China) and eventual Global video market – expect the counter offers to start coming in. $106M is a steal for this potential Kingmaker, and many could easily double that offer given the potential “disruptive” market power On2’s tech puts in Google’s hands.
If ultimate control of On2 and their tech is so important to Google and others (and I think it is for many of the reasons identified above)
for not only the US but Asian (On2 big in China) and eventual Global video market – expect the counter offers to start coming in. $106M is a steal for this potential hidden video Kingmaker, and many could easily double that offer given the potential “disruptive” market power On2’s tech puts in Google’s hands.
On2’s Matt Frost and Google’s Andrew Peterson appear on this radio interview:
http://www.publ...ICLE_ID=1540138
I´ve heard the “rumor” that they might open VP8 on the Quicktime user list.
Any further speculations or news ?
greets
Marc
This way Google can save the $ millions that they spend each year on licencing On2 and Adobe Flash technologies as well.
And by controlling Youtube and changing Youtube into using the video tags and an updated Ogg Theora format based on VP7 or VP8 of HTML5 instead of Flash, Google could in fact force the world to move away from the crappy and proprietary Adobe Flash.
@charbax
Wrong. Google does not pay any license fees to Adobe for ‘Flash technologies’. Adobe does not charge anyone any fees to deploy Flash content, instead Adobe makes its money (mainly) from selling development and design tools such as CS4, plus a bunch of servers and recently some hosted services and products too.
But for every video which Youtube encodes using VP6 they are paying license fees to On2 right now. These license fees are totally different than the ones attached to H.264 as the VP6 fees are payable at the point of encoding, but they are fees nevertheless. You should ask On2 about the costs for their server based encoding tools – but make sure you sit down before they tell you the price…
Also don’t forget that Google has its own range of communication tools – I’m sure the codecs come in handy there too. Lastly, as someone already pointed out, Skype have licensed VP7 from On2.
Google has put itself in a great position – surprising it hasn’t happened earlier really. Bargain price too.
Having said all that, H.264 won’t go away – and Google would not want that to happen anyway.
ha ha nice fantasy.
– that was meant as a reply to another comment. Great commenting system TechCrunch!
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
YOUTUBE DOESN’T USE VP6.
Only H.264. For god sake remeber that