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7 January 2016

HEVC Advance refreshes royalty terms, rivals must respond

Shortly after our last edition went to press before the holiday break, independent licensing administrator HEVC Advance announced a series of adjustments to its royalty rate structure for the HEVC digital video coding standard, also known as H.265 and MPEG-H Part 2, which should throw a spanner in the works.

The new terms include abandoning all royalties for public TV broadcasting, and free content distribution to OTA commercial broadcasting and internet content distribution. Most notably, after the original uproar in July 2015, the administrator has decided to reduce royalty rates in the categories of mobile devices, 4K UHD TVs, and connected home devices – which covers set tops, game consoles, Blu-ray players, PCs, and mobile and PC software apps.

The new structure reduces the total annual cap to $40 million across all three categories and it has scrapped the previous model of royalties on attributable revenue – instead imposing a content royalty on subscription, pay-per-view, and digital media, with a $5 million cap.

HEVC Advance also released a program designed to incentivize HEVC users to sign up as soon as possible. Firstly, for signing a license within the first 12 months, the licensee will receive a break on royalties due on products sold before signing up – including 50% off the annual cap, and a 10% reduction through the end of the first license period. However, if a license is signed after the first 12 months, standard rates will apply, but there will be no caps.

HEVC Advance has yet to release a full list of members but claims Technicolor, Dolby, Philips, GE, and Mitsubishi are among the line-up. The group lacks the backing of truly giant players, but claims that MediaTek is one of the leading contributors to the creation of the HEVC/H.265 video compression standard, with one of the most significant HEVC/H.265 patent portfolios in the world.

Qualcomm, which is renowned for avoiding patent pools and instead licenses its own technology, has yet to join fellow chip giant MediaTek, which owns MStar with around 70% global market share of smart TV chips. But in AOMedia we can see which way another chip major Intel is falling, in favor of no royalties at all. Members of The Alliance have been working on several video codecs, including Cisco’s Thor, Mozilla’s Daala, and Google’s VP10 – promise to deliver a royalty-free codec by early 2017.

Rival patent pool MPEG LA still has the same 32 members since we last reported on the grouping – one that is dominated by the two major smartphone camps Apple and Samsung, as well as Asian broadcasters and operators (NHK of Japan, NTT DoCoMo and Korea Telecom) and so can boast the majority of devices out there and the largest payers into royalty streams. The 83-strong list of MPEG LA HEVC Licensees includes Apple, Elemental, Fujitsu, Roku, Samsung, Media Excel, Amino, and the BBC.

The Cisco inspired Alliance for Open Media (AOMedia), which arose in early September 2015 with the backing of Google and Microsoft, along with Amazon, Intel, Mozilla and Netflix, is promoting a royalty-free, open source alternative to the HEVC/H.265 video codec. That codec, which was the front runner to be the next standard for fast online and mobile video streaming, has been entangled in a stand-off between MPEG LA and HEVC Advance – and following the latest move from HEVC Advance, we should expect the Cisco, Microsoft, and Google initiative to respond in the near future.

AOMedia plans to release a system which outperforms HEVC within 18 months and will update it every 18 months or faster. That same grouping wants to get to grips with other “proprietary” areas such as HLS, and replace it with a standard based on MPEG DASH, removing (cost at least) just in time packaging from the list of jobs needed in OTT video systems.

It has been an unsettling period in the 4K UHD arena since HEVC Advance fueled the dispute between streaming services such as Netflix and Amazon last year. However, under the revised royalty terms, streaming services will be required to pay 0.5% per month for every 4K UHD subscription. This means Netflix will be charged $0.06 per user of its $11.99 UHD offer, and royalties for Amazon’s Prime service will be $0.50 per annum for the $99 yearly subscription.

Although even at the reduced price, the enormous subscriber base for particular services will still mean handing over a very large sum. The issue here is that if Netflix or Amazon were to switch to a different compression system such as Google’s VP9, then any 4K sets fitted only with HEVC H.265 decoders would be rendered useless for streaming these services.

At European TV standards body DVB’s press conference at IBC in 2015, Chairman Philip Laven said that HEVC was coming to the aid of broadcasters, we noted that perhaps he had not seen the HEVC Advance Royalties – maybe he knew something we didn’t. We were also told to expect DVB’s new ‘Defining the Long Term Vision for Terrestrial Broadcast’ report by the end of 2015, which is yet to surface.

“After our initial pricing announcement we reengaged with key segments of the HEVC community, including content owners and distributors as well as device manufacturers, to better align our licensing structure and rates with the industry’s long-term technology goals. We are pleased with the results of our industry engagement and confident that the revised pricing structure and rates balance the needs of both HEVC users and patent owners,” said HEVC Advance CEO Peter Moller.