Please note: This is not a statement on behalf of Xiph.Org or Mozilla. I speak here for myself, my team, and other developers who share my views on an open web.
Let's state the obvious with respect to VP8 vs H.264: We lost, and we're admitting defeat. Cisco is providing a path for orderly retreat that leaves supporters of an open web in a strong enough position to face the next battle, so we're taking it.
By endorsing Cisco's plan, there's no getting around the fact that we've caved on our principles. That said, principles can't replace being in a practical position to make a difference in the future. With Cisco making H.264 available at no cost, holding out against H.264 in WebRTC makes even less sense than holding out after Google shipped H.264 in the video tag. At least under these terms, H.264 will be available at no cost to Mozilla and to any other piece of software that uses the downloadable plugin.
Cisco's license hack is obvious enough if you have the money: There's a yearly cap on total payments for any given licensed H.264 product. This year the cap is $6.5M. Any company that pays the cap each year can distribute as many copies as they want. There are still terms and restrictions on how the distribution gets done, but Cisco will be handling that (and only Cisco will be allowed to build and distribute these copies without a separate license).
Once you or your applications download the prebuilt codec blob from Cisco, you're allowed to use that specific blob for anything you want so long as you don't modify it or give it to anyone else. H.264 codecs for everyone! Cisco has committed to these blobs being available for just about every platform and architecture you can think of. "IBM S/360? Yes, please!"
This arrangement has obvious short-term benefits. Open source projects get licensed (if partial and restricted) access to H.264, and users don't feel like they're being held hostage in the ongoing battle between the open web and closed codecs. Firefox and other projects can install H.264 support (via Cisco), which is a big deal.
That said, today's arrangement is at best a stopgap, and it doesn't change much on the ground. How many people don't already have H.264 codecs on their machines, legit or otherwise? Enthusiasts and professionals alike have long paid little attention to licensing. Even most businesses today don't know and don't care if the codecs they use are properly licensed. The entire codec market has been operating under a kind of 'Don't Ask, Don't Tell' policy for the past 15 years and I doubt the MPEG LA minds. It's helped H.264 become ubiquitous, and the LA can still enforce the brass tacks of the license when it's to their competitive advantage (or rather, anti-competitive advantage; they're a legally protected monopoly after all).
The mere presence of a negotiated license divides the Web into camps of differing privilege. Today's agreement is actually a good example; x264 (and every other open source implementation of an encumbered codec) are cut out. They're not included in this agreement, and there's no way they could be. As it is, giving away just this single, officially-blessed H.264 blob is going to cost Cisco $65M over the next decade. Is it any wonder video is struggling to become a first-class feature of the Web? Licensing caused this problem, and more licensing is not a solution.
The giveaway also solves nothing long-term. H.264 is already considered 'on the way out' by MPEG, and today's announcement doesn't address any licensing issues surrounding the next generation of video codecs. We've merely kicked the can down the road and set a dangerous precedent for next time around. And there will be a next time around.
So, we're focusing on being ready.
Fully free and open codecs are in a better position today than before Google opened VP8 in 2010. Last year we completed standardization of Opus, our popular state-of-the-art audio codec (which also happens to be the best audio codec in the world at the moment). Now, Xiph.Org and Mozilla are building Daala, a next-generation solution for video.
Like Opus, Daala is a novel approach to codec design. It aims not to be competitive, but to win outright. Also like Opus, it will carry no royalties and no usage restrictions; anyone will be permitted to use the Daala codec for anything without securing a license, just like the Web itself and every other core technology on the Internet.
That's a real solution that can make everyone happy.
I can't resist a little codec fantasy football.
MPEG HEVC licensing isn't set yet. It will be interesting to watch the negotiations if Cisco's H.264 giveaway plan is wildly successful. In the future, could nearly every legal copy of HEVC come as a binary blob from one Internet source under one cap? I doubt that possibility is something the MPEG LA has considered, and they may consider it now that someone is actually trying to pull it off with H.264. Perhaps in five years, even cameras and televisions will download a software codec to avoid paying monopoly rents. Sillier things have happened given sufficient profit motive.
Or maybe they'll build in a free, legally uncomplicated copy of Daala instead. Dare to dream.
—Monty Montgomery <email@example.com> and others
October 30, 2013
 Cisco's cap liability is $65M over ten years only if
the cap amount doesn't change. Historically, the cap has increased
every few years, depending on the end-use license. For non-commercial
content delivery products, the cap was $3.5M for 2006-7, $4.25M for
2008-9, $5M for 2010 and is currently $6.5M for 2011-15.