I caught this post by Stefan Richter about changes to the BBC website and how despite a lot of public comment, BBC chose not to use Flash Video for news stories. As Stephan notes, the reason seems to be that the cost to add Flash Video to their infrastructure was simply too great. It's also a perfect backdrop to talk about where WPF/E fits here.
The BBC is a huge site and arguably one of the more highly regarded web properties out there. They had to do something with video, but their heavy investment in other technologies meant Flash video wasn't going to be a cost effective fit. There are still a lot of web properties that invested in video before Flash 8 came along and made high quality viable. As those companies start to reevaluate their web video Microsoft needs a way to keep them using Windows Media. Some sites, like the BBC, will decide switching to Flash is too expensive regardless. Other sites may say that Flash video simply offers too many benefits to NOT switch, but WPF/E makes this a much more interesting conversation. In answering the Flash video question for the BBC, Kevin Hinde had the following:
The plain answer is that the timing did not work well for us. YouTube launched in 2005, the same year as Flash 8, they started with a clean slate and that's what they chose. The BBC has been providing streamed video since 1997 so we have already made a huge investment in Real and Windows infrastructure. We think that our current choice of formats does pretty well: Windows Media Player is widely available, it is installed by default on new Windows machines, and for many users it is the only option; Real Player is available as an alternative, and for platforms which do not support Windows Media; The video quality at the bitrates we use is excellent in both codecs.
Windows Media is not a dead format. It has lost a lot of ground to Flash video, and rightly so, because Flash is cross-platform and much easier to use. But with WPF/E, Microsoft provides a cross-video platform solution that can compete with Flash Video. In the short term, WPF/E isn't about sites like YouTube that are already heavily investing in Flash, it's about sites like the BBC or CNN that are still using Windows Media but also see a lot of pressure to switch to Flash. The only major unsolved mystery is how far will WPF/E go in allowing developers to build rich web applications.