Company Profile: On2 Technologies Pledges Continued Innovation

Mike Savello, On2’s Senior Vice President of Global Sales for PC Platforms, agrees with this point, noting that current licensees often hold licenses for both VP6 and VP7.

"Our recent licensee announcements—including Flash 8 video—use the VP6 codec, which was released in 2002," said Savello. "The long-term nature of product development cycles sometimes means a codec being launched in a product will appear shortly before or after the launch of the next generation codec. In the case of VP7, many of our licensees have licensed VP7 as well, which actually takes less processor power and has a sweet spot at approximately 30% lower bandwidth than VP6."

McIntyre went on to reiterate that On2 was going after the holy grail of codec development—increasingly high quality at ever-lower bit rates, combined with constant or slightly declining processor throughput requirement. To achieve this, McIntyre said, the company had to innovate constantly. When asked whether On2—now flush with cash and big-name licensees—would pull back on the corporate culture of constant innovation that characterized the early days of QuickTime, Real, and WindowsMedia, McIntyre’s answer was an emphatic "no." He went on to note that, while other companies have slowed development in order to push adoption of a particular codec, On2 feels that the potential optimization of codecs is still in its infancy.

"We see innovation as something that’s given us a leg up on the competition," says Savello. "VP6 was released in a timeframe when several good codecs were released. VP7 was brought to market while H.264 was still being designed by committee—three years in the making—and slowing down innovation at a time when we have gained a reputation for continuing to push the envelope would be selling short the company’s future."

On2’s individual balancing act, now that it has received some much-needed and much-deserved public exposure due partly to its much-larger licensees, is to find a way to balance sales of its extant state-of-the art products and the growing awareness of the company from larger competitors with the leadership gap left by its outspoken former CEO. The company has promised to release its earnings in March as previously scheduled, has moved to put an interim CEO in place, and has stated that it expects to find a replacement for McIntyre within 90 days.

At its heart, though, the On2 story is a microcosm of the experience of tech startup alumni from the late 1990s. Having made it through the bursting of the bubble and the subsequent lean years, companies like On2 are emerging as "overnight successes" a decade in the making. The tenacity of these companies, continuing to drive the state of the art forward even when it appeared to be short-term business suicide to do so, foreshadows the potential technical strides the coming years will bring as the tech sector moves into the next phase of ubiquitous connectivity and delivery of video content anywhere at any time.