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On2: Move over, MPEG-4

Video-compression provider On2 Technologies is taking aim at MPEG-4, releasing a new version of its technology that it claims is close to true broadcast quality--and it's free.

Video-compression provider On2 Technologies is taking aim at MPEG-4, releasing an update of its own technology, known as VP5, as companies wrangle over proposed licensing fees for the emerging digital video standard.

New York-based On2 said VP5 is up to a 50 percent improvement over its VP4 technology, which supports RealNetworks' RealPlayer and RealSystem iQ to enable consumers to view digital video. The company said VP5 is designed to handle real-time compression of live TV broadcasts, including sports and action footage. For instance, if viewers were to watch an ice skater on a PC, the new codec would eliminate any white splotches on the screen as well as any shadowing, or ghost-like images, the company said.

Codecs are pieces of software that are used to compress large video files into smaller ones so that they can be sent over the Web, wireless devices, set-top boxes and electronic gaming devices.

"The timing (of VP5) is significant because codecs keep getting better," said Ross Rubin, senior analyst at Jupiter Media Metrix. VP5 "may well be the best one out there, partly because it's the newest one. But I don't necessarily think it's sustainable. It's just important to be competitive...(and) we've got to ensure that the video gets the amount of bandwidth it needs all the time for a good video experience."

The launch of VP5 comes as media companies are weighing a controversial licensing plan for MPEG-4, a digital media format that is being positioned as a new industry standard. Under the plan, put forward by MPEG LA, licensees would pay 25 cents each for MPEG-4 products such as decoders and encoders, with fees capped at $1 million a year for each licensee. It also suggests charging a per-minute use fee with no cap, equivalent to 2 cents for each hour encoded.

Tech heavyweight Apple Computer, a major MPEG-4 backer, quickly rejected the proposed licensing terms, previewing but refusing to release new QuickTime products that support the standard until a new deal is reached. In addition, the Internet Streaming Media Alliance (ISMA), a standards body, is asking MPEG LA to open the proposed licensing plan to industry review and discussion. The ISMA is concerned that the royalty model MPEG LA has outlined will not foster the development of MPEG-4.

On2 also opposed the new licensing plan and sent a letter to the ISMA, proposing to make its codec an alternative to MPEG-4 and promising to make it available at no charge. Last year, On2 released an open-source version of its VP3.2 video-compression technology.

Rubin said On2 is not the first company to make claims that its codec is close to true broadcast quality. He said Microsoft, for instance, has claimed that its latest codec will be able to deliver near DVD-quality in a minimal broadband capacity. He added that the quality of service available to provide these streams is the key ingredient because "once you achieve a certain amount of Internet congestion, you have to degrade the signal or it becomes choppy."

Still, On2 is wagering that VP5 will let people watch true broadcast-quality videos. The company said VP5 is more efficient and delivers higher quality at lower bit rates than MPEG-2, MPEG-4, Real 8, Windows Media 8 and Apple QuickTime 5. On2 said the download and streaming versions of VP5 are available through the RealPlayer at its Web site.

"Other codecs make an adaptation--they actually change the video and then compress it so it doesn't look the same," said On2 CEO Douglas McIntyre. "We don't do anything to the original...(VP5) gives back full resolution to the quality of the original stuff."