Today DailyMotion announced HD video upload and playback and rival site Vimeo announced high definition transcoding last October. With online HD content emerging, though, one has to wonder what the benefit is in promoting this type of content and at what cost. We know that streaming video is a difficult business to be in because of the cost structure. So where does HD fit with all of this?

The bulk of online video is user generated content, and one part of the problem is that UGC is hard to monetize. The other part of the problem is that online video distribution is expensive. Storage costs for a large content library combined with bandwidth costs to deliver that content to an audience result in non-trivial expenses. Adding high definition videos with their increased file size and bandwidth requirements looks like a step in the wrong direction.

The key to making HD video work online is to upgrade the content. With more compelling content delivered in a high definition experience online video destinations should be able to better monetize their offering. But this is a big risk. It all supposes that users want HD content online now. And if these sites were struggling to get good content while they were streaming standard definition video it’s unclear how adding HD to mix fixes anything. I think for the time being the best bet would be to wait and see what the market demands. Also, it will be important to see what the experience of viewing online video becomes as experiences like Hulu and Joost evolve.

For now, YouTube is unlikely to lose significant traffic to Vimeo and DailyMotion due to demand for HD. Longer term, HD will almost certainly become a requirement for online video sites if they wish to keep pace with innovation. Several pieces need to fall into place to make HD online a commonplace reality. And the time for that development is likely measured in months or even years, so right now HD online just isn’t worth the risk.