Patented Format Licensing WTF Extravaganza

[Strike911]

Okay, I need your help. Particularly the help of people in the commercial world who are actually involved in selling music, promoting themselves or their products with multimedia formats that are patented(!) and/or dealing with that patent's royalties or avoiding them by using an open format. Case in point: MP3s, but this could also spill over into video formats, too. I've scoured the internet/google and I just cannot find a clear answer on many situations. The confusion stems from the fact that MP3's are patented, and to use them commercially you have to pay a fee/royalty.

I'm working on an indie game that we want to sell at some point. We're doing everything legally, but when dealing with online promotion, most of the mainstream ways to get multimedia out (commercially) have fees and royalties associated with them. I want to post audio/video on our development website through an embedded player but I want to make sure we're doing everything legally. Are there any people with experience in doing this? What are the rates? Is there a limit on downloads or usage before you have to start paying? I think I found the website that handles the licensing stuff, but it information is scarce at best. I'm seriously considering using an open format like OGG or FLAC, but for now, I'm putting those on the back burner because I'm assuming the average internet surfer doesn't have the codecs necessary to listen to those types of files. The fact remains that the easiest way to get people to hear your stuff is if you have them available as MP3s or some other patented format.

But this complicated by other issues. For instance, I can use SoundCloud's service, upload a .OGG to their server, but they stream 128-kbps MP3 files for streaming in their embedded player. Do I have to pay royalties if I'm using a service like SoundCloud, or does SoundCloud cover these costs?

Another solution I've pondered is uploading a video to YouTube with the audio in it and then just make the video available on the site, but I fear this might also spill over to the world of video formats (although I'm unaware of what exactly they convert things to). I hear DailyMotion uses open video so that might be an option.

My question is this: is anyone familiar with dealing with MP3 royalties, or any other file format royalties? If I use a service like Youtube or SoundCloud, do they cover these commercial use royalties in the event that they convert my original file to a patented format?

I would love to hear any information or experience you've had in this regard.

I'm really leaning towards just using an open format but I just need a little more information from people more in the know than I am. And while on the issue of open formats, are there any known and documented cases of open formats being too much of a hassle for the mainstream to use them? I mean, I know open formats are struggling in most situations, but if I were to choose to go with using OGG or FLAC, would I be shooting myself in the foot? Again, it's not like we're trying to sell music; I just want to use it as part of our development blog to let any viewers we might have see what we're cooking.