this post was submitted on 03 Oct 2023
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AFAIK, the primary motivations were skipping ahead and changing resolution. If you wanted to bump all the way up to 720p, on your fancy 10 Mb/s connection - you'd have to start the whole video over. There was no way to deliver a video file except from beginning to end. So there was also no way to jump to the middle, and avoid a boring or familiar introduction, except by dropping to 144p potato quality and loading the while video in seconds rather than minutes.
In hindsight this is kinda dumb. The whole ordeal was in Flash. Youtube essentially delivered a poorly-sandboxed program for decoding their own video format, and it still took them ages to figure out they could stitch together smaller segments.
Actually that might point to the real reason it changed: Google bought them. Google bought them and their storage-space concerns disappeared. There was no more reason to limit everyone to ten minutes and fifty-nine seconds of, let's be honest, 480p30 video in 4:3. Longer videos would force them to implement seeking, seeking obviously demands segmentation, and segmented videos would allow them to switch resolutions on-the-fly, which lets the video keep playing at lower resolution if your bandwidth sucks.
Not that dropping resolution to avoid hitches worked, until Flash was dead and buried.