That’s what Google did today, announcing that its Chrome browser will ship without native support for H.264, the video specification on which the Web is arguably standardized (certainly it’s the one prefered by folks like Apple and Microsoft). Instead it will support WebM, Google’s open-source, royalty-free codec, and Theora, another open compression developed by the Xiph.org Foundation.

“We are changing Chrome’s HTML5 video support to make it consistent with the codecs already supported by the open Chromium project,” Google said in a post to the Chromium blog. “Specifically, we are supporting the WebM (VP8) and Theora video codecs, and will consider adding support for other high-quality open codecs in the future. Though H.264 plays an important role in video, as our goal is to enable open innovation, support for the codec will be removed and our resources directed towards completely open codec technologies.”

A ballsy move on Google’s part and one that will certainly spark off the video codec contretemps once more. Sadly, it’s going to make the the HTML 5 transition even more messy than it already is. Right now, video can be encoded in H.264 and served up to pretty much any browser or mobile platform–using a Flash wrapper if necessary. But once Google ends support for H.264, video producers will have to encode their content a second time to play natively in Chrome.

Which seems unfortunate. Particularly because Google is billing its decision as a move to free, open standards and away from proprietary ones like H.264 that must be licensed. By ending support for H.264, Google is actually encumbering video producers with additional costs. Said SmugMug CEO Don MacAskill, “I’m left with two choices: Gulp and double my costs on an unknown tech, or return to Flash as primary solution. Ugh. Thanks, Google.”

But Flash isn’t free and open standard, either. If Google’s goal is to “enable open innovation” shouldn’t it be dumping Flash from Chrome as well? Evidently, that’s not part of the master plan which includes Adobe as a WebM partner …

PREVIOUSLY:

• Google’s “Royalty-Free” WebM Video May Not Be Royalty-Free for Long
• Google Open Sources VP8 Video Codec. Will Apple, Microsoft and Intel Use It?

But Wilson doesn’t use the word “bubble” anywhere in the post he wrote this morning. Instead he refers to “storm clouds” in two markets: One for tech start-up financing, and one for tech workers themselves (courtesy Google, Facebook, et al).

These are ominous clouds! A few excerpts from his post:

• “The competition for “hot” deals is making people crazy and I am seeing many more unnatural acts from investors happening.”
• “We are also seeing large deals ($5mm to $15mm) getting done in a few days with little or no due diligence. Investors are showing up at the first meeting with term sheets. I have never seen phases like this end nicely.”
• “I think both of these situations are unsustainable. And anything that is unsustainable will eventually stop happening.”

On Twitter, I summarized Wilson’s post this way: “@fredwilson says yes, it’s bubbletime.” And then I heard immediately from Betaworks’ Andrew Weissman and O’Reilly AlphaTech Ventures’ Bryce Roberts, both of whom have invested with Wilson in the past: They don’t think Wilson means there’s a bubble.

And neither does Wilson himself:

Why does it matter if we describe something as a “bubble” instead of “troubling”? I’m not sure that it does for the layperson. But I think it’s very meaningful for professional investors like Wilson. For one thing, if they think it’s a bubble, then their own investors might wonder why they’re continuing to make bets.

It’s also worth noting that even if we are in a bubble, it’s nothing like the housing bubble, or the 2000-era Web bubble (when Wilson was making VC investments via Flatiron Partners): The scale isn’t remotely similar, and the general public has very little stake in the outcome.

But it’s Wilson’s post, so he gets the last word here. Here’s his response to an email I sent asking him for additional input (I’ve added a punctuation mark or two):

I don’t think it’s helpful to use the bubble framework. There is a supply demand imbalance in hot deals and sw engineers, particularly in Silicon Valley. That is driving up prices but also leading to some odd behavior. I just think it’s healthy to talk about it calmly and rationally.

[Image credit: Joi Ito]

But besides valuations, perhaps a more severe symptom of a brewing bubble is the recklessness by which venture capitalists are making their investment decisions.

Speaking Wednesday at the Digital Hollywood conference in New York, Venrock’s David Pakman tossed out an observation that makes the investment game sound like the Wild West.

“We are seeing what I would call bad behavior with investors looking at these hot spaces,” Pakman said, speaking specifically about ventures in social media and mobile. “Deals are getting done with little to no due diligence.”

Read the rest of this post on the original site

“The world would have a new free format unencumbered by software patents,” the Free Software Foundation enthused in an open letter to Google (GOOG) earlier this year. “Viewers, video creators, free software developers, hardware makers–everyone–would have another way to distribute video without patents, fees, and restrictions.”

A new era of Web video without the patent-encumbered formats that have defined the Internet to date. That seems ideal. But like many ideals, it may prove to be unattainable. As a number of observers have already noted VP8 isn’t free from patent liability. And now that Google has open-sourced it as part of WebM, that liability is likely to become an issue.

And quickly, too.

Indeed, Larry Horn, CEO of MPEG LA, the consortium that controls the AVC/H.264 video standard, tells me that the group is already looking at creating a patent pool license for VP8. Here’s an excerpt from my email exchange with him:

JP: Let me ask you this: Are you creating a patent pool license for VP8 and WebM? Have you been approached about creating one?

Larry Horn: Yes, in view of the marketplace uncertainties regarding patent licensing needs for such technologies, there have been expressions of interest from the market urging us to facilitate formation of licenses that would address the market’s need for a convenient one-stop marketplace alternative to negotiating separate licenses with individual patent holders in accessing essential patent rights for VP8 as well as other codecs, and we are looking into the prospects of doing so.

It would seem, then, that VP8 may end up subject to the same licensing issues as H.264. If MPEG LA does create a patent pool license for the standard, the free lunch Google promised yesterday may not be free after all.

Google certainly has the market muscle to guarantee broad acceptance of WebM and the VP8 codec–if it’s a royalty-free standard. But what if it’s not truly royalty free? Who’ll foot the bill? And is the company willing to indemnify its partners from patent litigation to push WebM?

For what it’s worth, Google seems to believe that it has done its due diligence here and has the necessary patent clearance for VP8. Said Google product manager Mike Jazayeri: “We have done a pretty thorough analysis of VP8 and On2 Technologies (VP8′s developer) prior to the acquisition and since then, and we are very confident with the technology and that’s why we’re open sourcing.”

Question is, was that analysis thorough enough?

I’ve asked Google for comment on Horn’s remarks and will update here if I’m given one.

Digg CEO Jay Adelson has left the company he has run for the past five years, leaving founder Kevin Rose to run the social news site in the interim.

Statements from Adelson and Rose (below) do not shed light on what happened, though I imagine the picture will start coming together in the near future.

But I can start by noting that Adelson has long been said to be restless at Digg and that he and the company’s board of directors have reportedly butted heads several times. Adelson, who commuted for years between Digg’s San Francisco offices and his home in suburban New York, finally moved his family to the Bay Area last fall.

Digg used to be best known as a company that was always going to be acquired but never got acquired. Google (GOOG) got close to buying it in the summer of 2008, and then backed away from the deal during due diligence.

Meanwhile, Digg’s growth has flat-lined for a while. Here via comScore (SCOR) is what it has looked since October 2009 (click to enlarge):

Here’s the official word from Jay Adelson, followed by Kevin Rose.

Hey all,

Got some news. After five years, forty million users, and an amazing ride, I’ve decided to step down as CEO of Digg. With the new Digg getting ready to launch, Digg Ads doing well, our sales force growing, our hiring ramping, and the company maturing well beyond its startup phase, I feel that now is the right time.

The entrepreneurial calling is strong, and I am ready to incubate some new business ideas over the next twelve months. As the economy exits a very deep recession, I believe that it is an excellent time for new companies to develop. Of course, I will continue to serve as an
adviser to Digg. In the interim, Kevin has agreed to step in as Chairman and CEO.

I’d like to thank Kevin, the Digg staff and the Digg community for their support, insight and, most of all, their loyalty in turning Digg into the force that it is today.

–Jay

Update from Kevin:

I want to be the first to thank Jay for the last five years of amazing work. You’ve been a great friend and mentor, we wouldn’t be where we are today if it wasn’t for you.

While I’ll miss working with Jay day-to-day I am excited to be taking on the role of Chairman and acting CEO, driving Digg forward on our promise to enable social curation of the world’s content and the conversation around it. We’ve been super busy on the product side getting ready for the upcoming Digg redesign and delivering our mobile apps for the iPhone and Android.

Thank you very much for your on-going support of Digg, I’m truly excited about the next five years, big things coming!

-Kevin

Because if you’re trying to handicap the way the copyright lawsuit pans out, today’s document dump won’t do much to help you. There are revelations here, but they’re of the minor and historical variety, and I’ll get to some of them later.

No smoking gun, though. Just a lot of chest-beating and desk-thumping as both sides talk past each other.

Still, it does make for fun reading if you’re of a certain troubled mindset. If you’re not, here’s a summary:

Viacom’s case: YouTube was full of content that wasn’t supposed to be there, and both YouTube and Google knew it.

Of course they knew it! Anyone who visited the site in 2005 and 2006 knew it. The problem was what to do about it.

And that’s the most interesting part of the emails and IM exchanges Viacom has dug up: They let you watch YouTube’s co-founders, and later, Google executives, argue over the best way to keep the site growing like a weed while fending off the lawyers.

Actually, they knew the lawyers would show up eventually. “Ok man, save your meal money for some lawsuits! ;) no really, I guess we’ll just see what happens,” co-founder Chad Hurley tells partners Steve Chen and Jawed Karim via email in July 2005, as the three men decide to leave some copyrighted stuff on the site.

As as YouTube boomed, Google (GOOG) was trying to figure out how its lackluster Google Video site could compete. The big debate, according to former executive David Eun: “Whether we should relax enforcement of our copyright policies in an effort to stimulate traffic growth, despite the inevitable damage it would cause to relationships with content owners.”

Google’s eventual answer, of course, was to buy YouTube. But it went in with open eyes. A due diligence report estimated that just 10 percent of the “premium” stuff on the site was authorized.

Google’s case: Viacom–which talked about buying YouTube–was perfectly happy to use our site to market its movies and TV shows. Until it wasn’t.

Of course it was! In 2005 and 2006, all of the entertainment companies were desperately trying to get their clips in front of the site’s huge audience. Even more so at Viacom (VIA), whose youthful audience was spending lots of time on YouTube.

And the fact that Viacom executives, who had lost MySpace to Rupert Murdoch (remember when MySpace was a world-beater?), were thinking about buying YouTube–in part so Murdoch wouldn’t get it–shouldn’t be surprising, either.

Google makes a lot of the fact that Viacom “secretly” uploaded videos to YouTube, either via its employees or from marketing shops it hired. But I don’t get the impression that the “secret” uploads were supposed to dupe YouTube. I get the impression they were trying to dupe YouTube users into thinking the videos were edgy and cool.

“The goal is to make it look “hijacked,” an executive at Viacom’s Spike network told the producers of a mixed martial arts show, describing a video he gave them so that they could seed it on YouTube. The idea was to make the clip “look as though it was leaked out by production.”

Viacom’s embrace of YouTube does bolster Google’s case in one way. Google shows, fairly effectively, that Viacom’s lawyers have had a hard time figuring out which YouTube clips the company authorized. If Viacom can’t figure out what’s supposed to be on the site, Google argues, how do you expect YouTube employees to know?

So. Strip out all of the depositions, documents and emails, and we’re back to where we started. This case will hinge on the way the court decides to interpret federal copyright law.

Viacom argues that YouTube is a video version of Napster or Grokster–designed to profit from intellectual property it knows is stolen. And Google argues that it’s doing exactly what the Digital Millennium Copyright Act tells it do–asking its users to behave, hoping they do, and taking down offending clips when their owners ask them to.

So pay attention to that ruling–it’s going to be really important. But unless you’re paid to keep an eye on digital media, you can ignore most of today’s paperwork.

[Image credit: Michele Hubacek]

About 10 days ago, there was a post in this column about interest by News Corp. and its MySpace unit in Flixster, the popular social networking site for movies.

In the post, titled “MySpace and News Corp. Eye Flixster (But for What?),” I wrote:

Whether this is an acquisition or more of a larger partnership deal with News Corp. digital entertainment sites is unclear. Several sources said a purchase was a possibility, while others talked about a more complex deal that did not necessarily mean a purchase.

Sources said any such deal is not imminent, but that News Corp. (NWS) itself has been conducting extensive due diligence on the San Francisco-based Flixster, part of a plan to combine it with Rotten Tomatoes, another News Corp.-owned site run by its IGN Entertainment division.

Well, BoomTown did more gumshoeing and it is indeed shaping up to be a very complex deal, according to many sources I spoke with, centered on Rotten Tomatoes merging with Flixster in exchange for a stake in the combined independent company by News Corp.

Flixster has attracted a huge audience–upward of 50 million–which trades all kinds of recommendations, ratings, news and even post user-generated movie reviews on the Web site and via widgets on social networking sites, mostly on Facebook.

Founded in 2006 by CEO Joe Greenstein and CTO Saran Chari, Flixster has raised $7 million in funding from Lightspeed Venture Partners and Pinnacle Ventures, as well as garnering an angel investment from Silicon Valley entrepreneur and LinkedIn founder Reid Hoffman.

Rotten Tomatoes features mostly premium content, including professional reviews, trailer videos and news. It has a community feature in beta, so it would be a nice fit with Flixster.

In addition, in a separate but related deal, the resulting company could have its social, user-generated and premium content threaded throughout MySpace, which is in the midst of transforming itself from a social networking site into a social media site for music and other kinds of entertainment.

Several sources noted that this deal being contemplated is typical of the overall strategy at News Corp., which has been targeting digital units that are not an obvious fit inside the company any longer for sale or other disposition.

In fact, the deal is not unlike one News Corp. did recently, flipping photo-sharing Photobucket into mobile photo service Ontela, with the media giant holding a large equity position in the the new entity.

The possibility of linking MySpace and the combined social movie site is interesting and yet another signal of one of the new strategies of MySpace: “Playing on other platforms,” as one source described it.

For example, MySpace recently announced it was adding its data stream to real-time search results on Google (GOOG).

And, it seems dead obvious that MySpace is likely to adopt Facebook Connect sooner than later, perhaps beginning with a smaller implementation early next year.

Focusing less on Facebook, which has long surpassed the once high-flying MySpace as the top-of-mind social network, MySpace is likely to value the massive cross-distribution for its much richer media content.

But that’s not all for MySpace, said several sources, all of whom noted that the site will be rolling out a range of significant design and other feature initiatives over the next 45 to 60 days.

These are all aimed by its new managers at juicing MySpace’s prospects, which have declined over the last several years, as have both revenue and engagement with consumers.

“This is not a rocket-ship ride to the moon,” said one person with knowledge of the situation. “It’s building again step by step.”

A Flixster spokesman declined to comment, as did News Corp. I am awaiting a call back from MySpace’s spokeswoman, but she is stuck in a security line at the airport.

Happy holidays, anyway, Dani!

(Full disclosure: News Corp. owns Dow Jones, which owns this site.)

In a Feb. 17 letter to Circuit City CEO Philip Schoonover, Blockbuster (BBI) offered to pay more than $1 billion for the chain. But, to date, Circuit City (CC) hasn’t fulfilled a request for due diligence necessary to make the bid definitive.

Why? In a conference call today, Blockbuster chief exec Jim Keyes described the offer as “simply too attractive to ignore.” But it seems Circuit City also thinks the offer might be too attractive for Blockbuster to finance. “… To date Blockbuster has been unable to satisfy Circuit City and its advisers that Blockbuster’s proposal could be financed,” the electronics retailer said in a statement. “In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price.”

Well, yes, there is that. And, of course, there are other issues as well. Like what, exactly, are the synergies between a foundering movie rental chain and a foundering electronics retailer–aside from the fact that they’re both, you know, foundering? If it’s Blockbuster rental kiosks in Circuit City stores, the alliance would seem doomed to failure. Wait. It is Blockbuster rental kiosks in Circuit City stores?

To be fair, Keyes says digital content is important too, and he seems convinced that Circuit City will provide Blockbuster with the infrastructure it needs to distribute video to TVs and mobile devices. “What this combination provides is the ultimate distribution channel for [digital] content,” he said this morning. “It’s not necessarily downloading content to the PC that will ultimately capture the consumer’s imagination. It’s the opportunity to get that content on your TV and your mobile device that is a game-changing opportunity.”

A game-changing opportunity for Apple (AAPL), maybe. But for a foundering, outdated video-rental outfit?