[7] It was developed by the Xiph.Org Foundation and distributed without licensing fees alongside their other free and open media projects, including the Vorbis audio format and the Ogg container.

It is broadly comparable in design and bitrate efficiency to MPEG-4 Part 2, early versions of Windows Media Video, and RealVideo while it lacked some of the features present in some of these other codecs.

Like most common video codecs, Theora used chroma subsampling, block-based motion compensation and an 8-by-8 DCT block.

Theora's predecessor On2 TrueMotion VP3 was originally a proprietary and patent-encumbered video codec developed by On2 Technologies.

[19][20] The license only granted the right to modify the source code if the resultant larger work continued to support playback of VP3.2 data.

[23][24][25][26] On2 also made an irrevocable, royalty-free license grant for any patent claims it might have over the software and any derivatives,[2] allowing anyone to use any VP3-derived codec for any purpose.

[12][27] In August 2002, On2 entered into an agreement with the Xiph.Org Foundation to make VP3 the basis of a new, free video codec, called Theora.

[citation needed] On 3 October 2002, On2 and Xiph announced the completion and availability of the initial alpha code release of libtheora, Theora's reference implementation.

In 2003, Mike Melanson created an incomplete description of the VP3 bitstream format and decoding process at a higher level than source code, with some help from On2 and Xiph.Org Foundation.

Google developers claimed that despite lack of adoption, Theora made a case for open and royalty-free codecs like AV1.

[41][better source needed] Evaluations of the VP3[42] and early Theora encoders[43][44][45] found that their subjective visual quality was inferior to that of contemporary video codecs.

[52][needs update] It began as a 2006 Google Summer of Code project, and it has been developed on both the Nios II and LEON processors.