Fundamental changes in intellectual property monetization, coupled with looming threats from AI technologies, are shifting the dynamics of future video codec adoption. Yet the greatest menace to MPEG—the godfather and former gatekeeper of video codecs—is the failure of Versatile Video Codec (VVC – H.266) to gain any sort of traction.
Those are some of the key disruptive takeaways from Rethink TV, Faultline’s sister forecasting service, available in the latest five-year projection on the video codecs market.
The ‘Media & Entertainment Device and Streaming Codecs Market Forecast 2025-2030’ report spotlights that, five years since VVC’s finalization in 2020, the H.266 codec is still reeling from the absence of any smartphone on the market with a native hardware decoder.
This is a major thorn in VVC’s side, due to the surge in on-device processing power in modern mobile devices, which has undermined the core business case for VVC. Many smartphones today can easily pack enough compute power for feasible software-based decoding, which in turn throws a spanner in the works of traditional royalty revenues for hardware-focused patent pools.
In turn, VVC’s underperformance has cleared the path for the Alliance for Open Media’s (AOM) AV1 codec to ascend, though not as spectacularly as AOM superfans would have you believe.
Rethink TV projects AV1 to surpass AVC in decoding usage by 2030, as the de facto H.264 codec slides into retirement—falling from 64.5% of decode usage in 2025, to just 12% in 2030.
VVC also remains elusive in TV sets, though one unique exception for VVC is its inclusion in Brazil’s forthcoming TV 3.0 standard. While the hybrid transition in Brazil, boosted by V-Nova’s LCEVC (low complexity enhancement video coding) technology, is set to grow VVC’s market share, it will not be sufficient, and by 2030 VVC will still lag behind AVC for decode usage.
Against this shifting backdrop, the waning potential for VVC’s device adoption is driving new approaches to patent monetization, as patent pools target streaming services rather than devices.
Faultline has written extensively about this sea change, and now Rethink TV has gone further by pulling out the Service Obtainable Market (SOM) for the newer streaming pools as well as the device-focused hardware royalties.
The streaming-focused pools are set to represent a substantial new component of the total market share from 2025 to 2030, but for exact figures you’ll need to unlock the full report in all its glory.
As visualized in the attached graph, the next five years are projected to show the end of conventional codecs. VVC and AV2 are expected to be the last of this generation, while future codecs like H.267 and the potential 6G-era codec are expected to be fundamentally different—relying heavily on AI and machine learning.
For H.267/AV2 to gain adoption in live encoding applications—whether mobile, embedded, or large-scale encoding—the complexity must be reduced compared to existing codecs like AV1 and VVC. However, this would inevitably impact compression efficiency.
Current discussions around H.267 suggest that AI-driven encoding will significantly increase decoder complexity (by 3x to 5x compared to VVC), making the encoding process even more computationally demanding.
A shift towards AI-based tools will be disruptive not only for the old guard of codecs, but also for the traditional model of monetizing codec patents. While this could provide something of a clean slate where innovation can thrive, a rush of AI-based tools is likely to trigger endless sleepless nights for the folks in charge of monetizing these patents for the many organizations which have invested countless time and money into codec R&D.
A wildcard takeaway from the report is the rise of AI-generated patent filings, which threaten to completely overwhelm the existing patent processing ecosystem. If courts cannot contain the expected surge in litigation fueled by AI, companies may be forced to revert to trade secrets rather than patents, per Rethink TV.
Conclusively, the report reveals a volatile market defined by a radical realignment of revenue streams—fueled further by an impending technological rupture and the failure of so-called next-generation codecs to carry the torch.