I know I am not the only one who thinks there is way too much hype within some segments of the online video industry and none more than the subject of "cord cutting". Far too many writers, bloggers and analysts are preaching about consumers dropping their cable service in favor of getting video content from the Internet when in reality, that's not happening in any large scale and shows no signs of doing so. I get the sense that many are simply writing for headlines and want to use scare tactics like cord cutting to create a false sense of panic amongst those who don't know better.

As the economy starts to show small signs of improving, it seems more people want to try to build this industry back up with hype rather than with cold hard facts. The online video industry has been through a lot of bubbles in the past and any vendor in this space will tell you they stink for business. Part of the bursting of those bubbles is due to many preaching about things taking place in this industry that simply aren't happening and as a result, are setting wrong expectations.

That's not to say the topic of cord cutting should not be discussed, but when many people use
the phrase, they make it sound like it's impacting the market, when it
isn't. In fact, the cable companies continue to grow their subscriptions
to TV year after year and more than 90% of U.S. households subscribe to some kind of pay TV service. Anyone who thinks the cable companies are dying
or that online video based content offerings even come close to what
cable offers in terms of reach, inventory and quality, is fooling
themselves and hurting the industry by implying it.

The cord cutting phrase could turn out to be the single biggest downfall in this industry, simply to do the fact, that's it's not taking place in volume. In fact, to even imply it, without mentioned that it's an isolated case is simply wrong. When some want to imply, suggest or predict that the cable industry is going to be taken over by an online video based offering, they setting up a lot of companies in this market to fail. Based on those wild predictions, vendors change their entire strategies, raise new capital for a market that does not exist and lose focus on the real business opportunities in the market today. Companies start believing the hype and get so focused on what they think is the "holy grail" of the online video industry that they lose their way. All we have to do is look at "TV Everywhere" as an example of this.

When Comcast first announced their TV everywhere service, now called Xfinity, the vast majority of bloggers and analysts fell all over themselves to talk about how good it was going to be and how it was the start of a new "TV Everywhere" revolution. The service was not even live in the market and blog post after blog post hyped the service like never before. Yet, now that the service has been out for five months, where are all those analysts who said it was the start of a whole new TV Everywhere revolution? When was the last time you saw anyone write anything about Xfinity? So far, it's has had absolutely zero impact on the market, yet how much hype surrounded it before it even launched? And now that it's in the market, where are those same writers and analysts who said it was going to change the landscape for pay TV? And I'm not picking on Comcast because three years before Xfinity, all the hype was around Joost and the impact it would have on cord cutting. How well did that work out?

Every month is seems like a new report is coming out that wants to imply that cord cutting is taking place and is going to ramp up over the next few years. A recent report from the Yankee Group predicts that 1 in 8 consumers plans to cut their TV service this year in favor of Internet options but rightfully points out that, "the decision to cut off pay TV services is an economic one." I know of many folks who have cut their cable service simply due to the fact that they don't watch a lot of TV to begin with and are simply trying to save money. But that has nothing to do with getting video online.

And by survey standards, even I would be classified as one of those eight users who the Yankee Group says, "will reduce their pay TV services" since I recently canceled my HBO service as I watch more cable shows than I do movies. But I didn't cancel HBO because I can get their content online, I can't. I reduced my pay TV services simply because I wasn't watching movies. Consumers do cancel services for other reasons besides just replacing them with a different distribution medium. I do like the fact that in the report, the Yankee Group does say that cord cutting is a, "small phenomenon now" which puts things properly in perspective, but sends quite a different message than the title of the press release which is, "New report finds consumers reducing or eliminating pay TV services in favor of Internet options." That's a bit of a mixed message.

Another report by Strategy Analytics estimates that, "the number of so-called "cord cutters" could reach more than 10% of US television households by the end of the year." What they don't say is why these consumers will supposedly cut the cord and whether the cord cutting is a result of a poor economy with people trying to save money, or because they are replacing that video consumption in some other way. This is just one example but there are lots of reports out in the market that use language that's very generic, yet also seems to want to alarm readers.

At the Cable Show last month, executives from multiple cable companies said so far, "there’s not any real evidence" of cord cutting and mentioned that telephone companies that reported earnings in May added about 500,000 net new subscribers combined in the first quarter. Or course, you can't always believe what a cable executive may tell you when it comes to online video, since they have a vested interest in not seeing more content move to the web, but it's hard to argue with the number of new subscribers for pay TV. Not to mention, if even 10% of all the current TV subscribers went to the web to get video at the same time, delivering that video on the Internet would not scale with a guaranteed quality of service (QoS).

Of course, just like the print business, we know the pay TV business is
being disrupted thanks to the Internet, that I am not debating. But instead of many thinking of
online video as a replacement for TV, it should really be thought of as a
compliment to it. While we each have our own opinions on pay TV
services, frankly I'm happy paying $95 a month for a 25Mbps FiOS
connection, tons of channels I actually watch, video quality I can't get
online and unlimited phone calls. Clearly some won't agree with me but
that's simply a difference in video usage, content tastes and perceived
value of the service. But to imply that any large volume of people are cutting their cable TV service in favor of online video, or that there is any data to show this is a major trend moving forward, simply would not be accurate.

Related:

– Cable Companies Hyping Over-The-Top Video, But Where's The Business Model?

– Some Industry Vendors Betting Big On TV Everywhere, Most Will Lose

– The Promise Of TV Everywhere Is Doomed For Failure, Here's Why

– TV Everywhere Offerings Will Struggle To Be Successful

While I agree with those that think Google making VP8 an open-source video codec is a big deal, even if it ends up having licensing issues, it's way too early for anyone to talk about the demise of H.264. It took years for H.264 to surpass VP6 and become the preferred video codec  and it will take years for VP8 to seriously challenge H.264. While initially the introduction of VP8 is bad news for content owners since it means more complexity in their workflow, over time it's really about giving them more choice, which is a good thing.

For Google, they know that VP8 is a long-term play, just like YouTube has been. Google is willing to spend the time and money to get VP8 widely adopted without the need for the codec to have to generate any revenue for any of their product lines. Google makes no money from licensing VP8 so this is not about money for them, not yet at least. Initially, VP8 will be just like YouTube. A platform that enables them to get mass scale and reach and plenty of time to integrate video into other major lines of their business.

As the browser wars continue to heat up and companies take sides on which video codecs they will support, Google's in a unique position. Not only do they own one of the fastest growing browsers with Chrome, but now they also own the VP8 video codec and control YouTube which has the most traffic of any site on the web. While some have suggested that all Google needs to do is convert everything on YouTube over to VP8 to get mainstream support for VP8, that by itself won't be enough. If it was that easy, then Google would not be working with all of the other hardware, software and platform partners they announced last week.

This is a long-term play for Google and one that involves multiple devices, which means they have to have hardware support. And even with the hardware partners they announced last week, we still don't know exactly what those hardware providers are going to do. While many partners were quick to say they "support" Google's initiatives, they haven't said exactly how they will do that or which future chipsets will offer support for VP8. The bottom line is that that true VP8 support is going to take years to get but Google is in a position where they don't need to rush the adoption. Google can take their time to do this right since HTML5 is still not ready for prime time and content owners still have plenty of time to devise content monetization models.

I'm sure some will judge Google based on the adoption of VP8 six months or even a year from now, but that would be short-sided thinking on their part. With the news Google put out last week and the groundwork they are laying for what will become of VP8, the real judge of VP8's impact on the market won't be truly felt for a few years.

When On2 announced their VP8 codec in September of 2008, they made some pretty big claims comparing the improved quality of VP8 over H.264. Specifically, On2 said that VP8, "delivers over 50% bandwidth savings compared to leading H.264 implementations" and stated that VP8, "surpasses the compression efficiency and performance of every other video format on the market." While the industry was quick to take note of these statements, many were also quick to question On2's claims. Now, based on test results published, it's clear that the quality of VP8 is not as good as On2 said it was and makes one wonder why Google isn't setting forth proper expectations since they now own the VP8 codec.

For more than a year, myself and others asked On2 time and again to provide the technology to the industry so that third-party evaluations comparing VP8 to H.264 could take place. While On2 had been in the codec business for a long time, they also garnered a reputation for making a lot of big performance claims with their other codecs, like VP7, that turned out not to be true. When Google decided to buy On2 last year, most people assumed that whatever On2's claims were about VP8 must be true or else why would Google be interested in the codec? While that would be a reasonable assumption to make, based on new test results, it's clear that VP8 is not better than H.264 at all.

To be fair to Google, at no time that I recall did Google ever say VP8 was 50% better than H.264. That was language that came from On2 and when Google acquired the company, they didn't make any performance claims comparing VP8 to any other codec. But the problem that Google now has with VP8 is that they also didn't refute anything On2 had been saying for the past 18 months. On2 set expectations for what VP8 could do and since Google didn't say otherwise, many are now going to be disappointed when they find out those claims aren't real.

Based on test results from two different codec experts, Jan Ozer (test results) and Jason Garrett-Glaser (test results), they both came to the conclusions that the VP8 codec provides similar quality to H.264, but in most cases, H.264 is still better quality wise than VP8. Both also stated that most won't notice the difference between VP8 and H.264, but that's not what VP8 was suppose to be about. VP8 was touted as the video codec that was suppose to replace H.264 because it could offer better quality at half the bandwidth, something both reviewers said is not possible.

Google did mention yesterday at their I/O
conference that by encoding videos for YouTube with the VP8 codec it would enable Google to save money on their bandwidth costs. But what Google didn't say is how much it would save them or even give any kind of comparison numbers highlighting the differences between H.264 and VP8 when it comes to the number of bits delivered. Considering that's suppose to be one of Google's selling points for VP8 and no details are given anywhere on their webmproject.org website regarding this subject, one has to wonder what Google is referring to.

After reading Jason Garrett-Glaser's long and very detailed review of VP8, it's clear that Google has some major problems that go a lot deeper than the subject of bandwidth savings. Jason found so many major problems with VP8 that he summed up his review by saying that, "VP8 is not ready for prime-time", "the encoder’s interface is lacking in features and buggy" and most importantly, it appears that Google has not improved upon the code they acquired from On2.

Jason says that, "the VP8 software basically is the spec–and with the spec being “final”, any bugs are now set in stone. Such bugs have already been found and Google has rejected fixes." While the specs may be final, in fairness to Google the website does say that the encoder/decoders are just preview releases and one would expect those to be improved upon over time. But if you are Google, why rush VP8 out to the market so fast when clearly it still has a lot of flaws? This is not a short-term play for Google and it's not like they rushed VP8 out the door to make money off the licensing.

Also, keep in mind that VP8 was out in the market for almost 18 months before Google acquired it and in that time, not a single content owner that I saw ever adopted VP8 from On2, even though On2 made a big stink about how many content owners were testing their VP8 codec. Now we know why we never saw any press releases in those 18 months announcing any customers for VP8.

Frankly, the way Google has handled the On2 acquisition and the release of VP8 simply has me puzzled. Google's not a bunch of dumb folks and I don't see why they would rush an inferior product out to the market, make it open-source and then hope it would unseat H.264 all while not getting any input from developers before the initial first release, even if it is beta. If Google permits changes to the spec and allows the developer community to help fix some of the glaring issues with VP8, I could see that approach. But at no time during Google's presentation yesterday did they frame the release of VP8 that way or ask for help from the development community to fix issues that they must know exist.

There are a lot of unanswered questions here and hopefully someone from Google will address these points on their blog since it's only going to be another 12 hours or so before these issues with VP8 come out of the small developer community blogs and into the major media spotlight.

No surprise here, Adobe has taken the stage at Google's I/O conference to announce that their Flash player will include VP8 codec support. Smart move on Adobe's part as now the Flash player supports video encoded in both H.264 and VP8. While many have been quick to say that H.264 will dominate the web for video content, with Google's announcement today, that's no longer clear. 

Apple is pushing H.264, Google is backing VP8. Things are going to get really interesting as the battle between H.264 and VP8 begins. I find it funny that for the last 15 years, almost no one outside of the industry even knew what a video codec was. Now all of a sudden, it seems everyone is learning what codes are, how they work and which ones should be used depending on the device that video is being played back on.

Google's announcement today has a lot of implications on the video industry and the real story, to me at least, it not about video codecs. It's bigger than that. For Google, I think this all ties back to advertising, which I'll explain in further details later on today.

As I expected, Google just announced a long list of partners who will support VP8 including 14 hardware vendors including AMD, NVIDIA, ARM, Texas Instruments, Qualcomm, Digital Rapids, ViewCast and Logitech amongst others. Other video ecosystem partners include Telestream, Anystream, Inlet, Brightcove, Encoding.com, Ooyala, Kaltura, Sorenson Media, and HD Cloud.

We don't have many details yet on how quickly hardware support for VP8 will be out on the market, but the fact Google has the major players on-board is a big deal. More to come.

You can see the entire list of partners here.

Someone just gave me a tip that Google's new video initiatives that will be announced tomorrow around VP8 will be called the "WebM Project" and they pointed me to the domain of www.webmproject.org which doing a registar lookup shows the domain is owned by Google Inc., registered only 20 days ago.

Between all the details that are starting to come out about Google's announcement tomorrow, it's clear that Google's going to be doing a lot more than just open-sourcing the VP8 video codec. And if the rumors I heard from earlier today are true, and Google does in fact have or will have hardware support for VP8, then their announcement is going to be a really big deal.

I don't know what the "WebM" stands for, but one could imagine that Google thinks of this as much bigger project than just video content and is using the M for media to encompass all kinds of web based content.

In addition to a long list of video ecosystem vendors who will support Google's announcement tomorrow of their open-sourcing of the VP8 codec, I'm also hearing from content owners who have been working with Google in an effort to make their videos available using the VP8 codec. While it's not at all surprising to have vendors support the codec, for Google to have already convinced some content owners, and some large ones at that, to support their VP8 codec could be a very big deal.

But even more important, numerous sources are telling me that Google plans to announce hardware support for VP8. If true, and VP8 does what it On2 claimed it could, the possibility does exist for VP8 to seriously challenge H.264 over time if Google can get enough hardware support, which I think they have a good shot at doing. If that happens, we could see a push away from H.264 if Google approaches the market correctly. Without hardware support, VP8 can do well, but it will never disrupt H.264. So the thing to watch from Google's announcement tomorrow is any hardware deals they mention or any future talk of companies providing hardware support for their VP8 video codec.