The LGPL and video codecs

Also exciting is the annual cap for big organizations.

Here is how it really works:

If you're too small to be a good source of income, but your usage can help cement adoption through network effect… You can use it at no cost.

If you're big enough that you could easily cause adoption of an alternative all on your own, you benefit from an annual cap that lessens the pain and gives you a competitive advantage over medium sized players (who pay a higher effective per-download fee than you do, so they can't be as competitive)

For everyone else: The pricing depends on the viability of alternatives. MP3 pricing went to a small fraction of their prior rates right after Vorbis hit 1.0.

Since viability depends on adoption and adoption decisions happen individually it's possible to charge much higher than the frictionless free market fair-price. The cost of getting a new format adopted is low from an overall perspective, but if you believe that you have to carry most of the burden yourself it can be rather high unless you are a very large org.

This market inefficiency goes away if people collaborate and share the cost of driving the adoption of an alternative. H.264 patent holders (Nokia and Apple) were able to obstruct one obvious attempt at cooperation, the HTML5 baseline recommendation, but they can't block them all. There are also a few large players, like Wikimedia and Mozilla, which are somewhat immune to the cap incentive because they don't compete like normal commercial players do.

(Correcting the article: As of right now Firefox has no support for plugins to add formats. Including such an option at this time would be damaging to their goal of getting a baseline format supported.)

There are some interesting consequences of all this: If you're not one of the few companies receiving royalties its in your interest to ensure that Ogg/Theora is widely and robustly supported— even if you never intend on using it, because only if the alternatives are viable can they exert downward price pressure.

That applies the set of devices using things marketed as "H.264 decoder" chips. They usually are some oddball semi-proprietary thing that comes with magic microcode blobs. It's still software, but not something the general world knows how to program. So my "anyone can fix it" doesn't apply. You have a good point there.

The WDTV, a kind of media playing set top box, is an example of a device using a blobby playback engine that could almost certainly play Theora if the maker of the chip cooperated. Some folks are trying to convince them— but I suspect that they'll need to improve their Chinese skills and order a few million chips before they get a return email.

Though, in many devices that people care about and can expect to get firmware upgrades for (i.e all(?!) current generation mobile devices) the decoding is done on a fairly conventional chips simply because the device is used for many purposes and thus needs a fast generally programmable CPU/DSP anyways which makes the parts count for a dedicated decoder unjustified. We can program these. It's just a question of someone sitting down and doing it.