Analysis The MPEG Licensing Authority (MPEG LA) has released pricing for High Efficiency Video Coding (HEVC) that is almost certainly low enough to claim the market overnight.
HEVC is the successor to the tech used to encode video stored on Blu-ray Discs and streamed in high-definition digital TV transmissions the world over. The previous standard was called H.264 – aka MPEG 4, aka Advanced Video Coding (AVC) – and the current one is now H.265.
In the past, particularly when H.264 pricing was first mooted, there was enough complaint that some factions wanted to shift to alternative technologies and in the end the royalties were repriced.
The MPEG LA has selected which patents it believes are essential to an implementation of HEVC from just 23 organisations, and will collectively license all of these patents in a single pool of patents. Interestingly there are some major contributors to prior codec patent pools missing from the list and we suspect many of these – such as Technicolor, Microsoft and Sony – may be added later one way or another.
The list includes Apple, but neither Microsoft nor Google. Also present are a variety of research institutes and operators in the US, France, Korea and Japan along with the usual industrial firms such as Fujitsu and Hitachi, along with JVC Kenwood, which is included in most codec patent pools.
Siemens is one of the few European industrials included and there is no information on Tagivan II LLC, which appears to be a collection of Japanese patents run through a US patent company, though we are happy to be corrected. Finally, US video conferencing specialist Vidyo is included in the essential patent holders. Samsung is there – but not LG, nor Sony, Toshiba or Panasonic.
Typically more companies will insist on their patent essentiality and this number may be increased by as many as 20 or so extra names over the lifetime of a patent pool. H.264 currently boasts some 33 licensors, including Tagivan II, which was certainly not on the list when we last looked, as few years ago.
But the critical thing is the price, not which companies get the money. The first 100,000 units a year are free of royalty. After that it is a simple 20 US cents per unit, which is the same basic payment unit that was eventually settled on for H.264.
However there are two big differences. There is no further volume discount, whereas H.264 dropped from $0.20 per unit to $0.10 after 5 million units a year, and the maximum payable is far higher at $25m, rather than $6.5m. These values will be increased by no more than 20 per cent once every five years.
While companies like Apple, Microsoft and Google may not baulk at the $25m-a-year payments, particularly Apple because it will be a net beneficiary of the patent pool, it will still stick in the gullet of the other two, given that they have major codec programs of their own. In order to pay the full $25m, it will require shipments of 125 million devices or user instances in a single year.
Also unlike in the case of H.264, not everyone in the ecosystem has to pay, so if the chip makers pays, the device maker and operator do not have to. The chip maker can therefore claim it back in chip pricing from the ecosystem at large, passing the cost on. In H.264 licensing, the MPEG LA introduced the idea of a variety of types of sub-licence.
These things are never quite predictable and there may be some loud cries of complaint and Google may well take umbrage and once again attempt to sideline HEVC in favour of its own codecs, while others may complain about pricing or refuse to pay, but to us this looks less contentious than previous generations of codec licensing. Another thing we may witness is that some of the ignored companies may sue licensee companies to prove that their technologies are also “essential,” and get a court of law to decide rather than the MPEG LA.
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