Ed Bott posted a great analysis on why Microsoft chose H.264 for HTML5.  At 10 to 20 cents per user in royalty payments (capped at 10% increase every 5 years), generous hardware support, and indemnification from hundreds of patents from 26 companies across 44 different countries, the choice was obvious.  Companies that choose alternatives may still infringe on one of the hundreds of patents covered under the H.264 video codec (compression decompression) license covered by the Moving Pictures Expert Group Licensing Authority (MPEG LA).

Of course this may present some challenges to the Free and Open Source Software (FOSS) community that prefers distributing free software because it could require up to a $5 million a year payment for very popular applications.  Applications that distribute less than 100,000 copies are exempt from royalties but the bigger ones will have to collect money from their user base.  A $5 payment would likely cover a 25-year effective “life time” royalty payment but there is a notable price difference between $0 and $5.  They can choose to ignore H.264 and use something else but if they want to use a relevant codec with other people’s intellectual property, then they will need to pay up.

Open Source solutions deploying licensed codecs is nothing new.  The Open Source PBX (a system that controls phones in an office) solution Asterisk charges its users $8 per subscriber for a G.729 VoIP codec license.  That makes the 20 cent H.264 license look dirt cheap by comparison.