Dan talk to On2′s CEO on the impact of H.264 codec that will be supported by Flash Player 9 in addition to On2 VP6 Codec, a proprietary technology.
H.264 can be very expensive if you want to distribute millions of encoders for applications like video chat or user-generated video publishing. In addition to licenses and fees to acquire an H.264 software development kit (SDK), a second intellectual property (IP) license is also required from MPEG-LA. And the same is true for the new AAC+ audio standard in Flash, which requires a separate IP license from Via Licensing in addition to a SDK license.
Additionally H.264 is a fairly complex codec that requires significant CPU cycles for encoding and playback, especially for HD content. For these reasons, Bill says there will continue to be a strong market for VP6-based Flash video in the coming years. Link.