Google buying On2: What difference does it make?

Yesterday, in a Press Release Google and On2 announced that Google is finally acquiring On2 Technologies Inc., a leading developer of video compression technology. On2 is about 'creating and delivering high quality video over IP networks." Google is also about Youtube, we know. And it is a $ 106. 5 million deal they say. '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,' according to the Press Release. What difference is it going to make, if Google acquires On2?

Now, experts say the game is all about video codecs. Video codes enable video compression and On2 makes them. VP6, VP 7 etc are high defenition, high quality video codecs, developed by On2, used in Adobe Flash Player, Web2.0, VoIP, mobile video and other embedded devices.. But at present, VP6 and VP7 are losing out in the game to H.264, which comes under GNU General Public License. That means H.264 comes under free licence and people have the freedom to modify and distribute it. VP6 is a licensed codec and expects companies to pay a licence fee every year. VP6 of course is about quality videos. And people hope and pray that Google makes it open source.

What happens if Google makes VP6 open source?

1. Companies like Adobe,AOL, Skype, Nokia, XM Satellite Radio, Sony, Yamaha, TI, LSI Logic, Analog Devices, VideoEgg, Brightcove, Cox, Naver.com (Korea), Daum (Korea), Tencent(China) etc, who are already using VP6 will continue using it and building on it for free, without having to pay licence fee to On2. This means they come back to use the more superior VP6 and we can forget H.264. Quality of videos across platforms will improve.
2. HTML5 is on the way and it will enable browsers to handle videos without the help of plugins like Flash Player or Silverlight. This will help developers stop bothering about a lot of software compatiability issues. It will also help users save a lot of hard drive space, as plugins need not be downloaded.  
3. Mobile phone users will be able to send their MMS Videos to other mobile phones, without the fear of losing quality.   
4. People who do Video Conferencing using Webcams can then start thinking about videos that are viewable and not distorted as they are these days. 

Google can go ahead and not open source On2 video codecs at all. What happens then? Apple has its QuickTime. Microsoft has its Silverlight. Adobe has its Flash. And Google has what it takes to give them the foundation - VP6 and VP7. This means, at one point or the other, these biggies will end up paying licence fees to Google. This sale was a smart move, wasn't it?