YouTube To Dump Flash Video, Go H.264 For AppleTV.

Steve Jobs says Apple plans to upgrade AppleTV to run videos from Google’s YouTube.

Or, is it the other way around? YouTube plans to dump Flash videos to run H.264 video for AppleTV. What’s going on?

Not surprisingly, Google and Apple have done another run around Microsoft to take a leading role to stream videos on the internet. How so?

YouTube’s chosen video format has been Flash which runs reasonably well in all modern browsers. Flash has a small file size which is good for streaming but video quality is nominal.

David Moody, Apple’s VP of Worldwide Mac Marketing, says Google will drop Flash-based videos in YouTube in favor of streaming H.264 video—the format preferred by iTunes, Mac and Windows, and AppleTV.

This is an important and positive development for Apple and Google, but troublesome for Microsoft. For Apple and Google it represents another partnership which enhances YouTube, provides higher quality video for internet viewers, improves the value proposition for AppleTV, and leaves Microsoft out in the cold. Again.

YouTube videos encoded in H.264 will look great on AppleTV. Since iTunes is the synchronization and delivery mechanism for AppleTV, both Mac and Windows users will benefit with higher quality video from YouTube, the largest video service on the internet.

According to Moody, as reported in iLounge, the switch from YouTube Flash videos to H.264 videos for iTunes and AppleTV will begin in stages, starting in mid-June.

New YouTube videos will begin to show up in H.264 format, with all videos converted by later in 2007.

The end result of this arrangement between Apple and Google is higher quality videos available from YouTube which can be viewed directly on AppleTV, and stored in iTunes.

Our Macs and PCs have become collection machines. We collect music from CDs and the iTunes Store. We collect TV shows and movies which can be viewed on Macs and PCs, and on your TV screen via AppleTV.

Currently, getting a YouTube video captured and encoded into a format ready for iTunes required an extra application, a few clicks, and more time. Then, the video quality was poor. All that goes away with the Apple and Google arrangement for streaming H.264 video in YouTube.

Is this good for Mac and PC users? Yes. It means higher quality video from Google’s YouTube will be immediately available for iTunes, Mac or Windows. That makes video available for TV viewing via AppleTV.

Apple also announced a build-to-order option for AppleTV, increasing the hard disk size from 40 gigabytes to 160 gigabytes, adding another $100 to the price. There’s no doubt about it. We’ll be collecting more videos and we’ll need the hard disk space.

What do you think? Will you collect YouTube videos in iTunes if they’re encoded and streamed in H.264 format? Does that make you more inclined to buy an AppleTV? Share your thoughts in the Comment section below.