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17 December 2020

LCEVC licensing leak shows favorable royalties for wider industry

Faultline has picked up on a few breadcrumbs of information relating to the royalty licensing scheme for LCEVC (low complexity enhancement video codec) – discussions which developer V-Nova has been closely guarding long before the technology was given the standardization stamp of approval last month.

Back in July, the UK-based compression vendor taunted royalty-free licensing models (namely AV1) for not being true to their word. As we keep being told, open source and royalty free are not the same thing. The likes of the Alliance for Open Media (AOMedia) can claim a royalty free model until the cows come home, only then to argue that patents are invalid or third-party examiners are wrong. V-Nova has therefore claimed LCEVC would be “cheaper than royalty free.”

Some five months later, we have learned that there will be a series of separate licensing models for different verticals. For video entertainment, V-Nova is offering its LCEVC SDK with low and capped fees – where royalties are payable by the actual content distributors, as these platforms are ultimately the ones benefiting from the bitrate reduction and improved QoE delivered by LCEVC (aside from the end user). Crucially, by charging the streaming services for using LCEVC, this means browsers, operating systems, and device playback drivers are all able to use the technology on a royalty free basis – which is drastically different from other patent licensing schemes.

Better still, because LCEVC is already shipping today as V-Nova products, as well as being the only true software codec of the three video codecs launched by MPEG this year (along with VVC and EVC), it is instantly deployable and usable. V-Nova is currently urging potential licensors to reach out for more details on the licensing model and access to software libraries.

Streaming media expert Jan Ozer revealed the exclusive licensing details during a recent webinar, in which he stressed the significance LCEVC being ready for action. “If you send LCEVC-encoded video to a phone that doesn’t know what LCEVC is, it will still play H.264 video because of backwards compatibility,” he explained.

Like the technology itself, which takes a two-layered approach with a base encode followed by an enhanced encode, V-Nova is attacking the licensing conundrum with a two-phase model – splitting users into these two camps. However, while browsers, operating systems, and device drivers in the second camp will be initially exempt from royalties, we see no reason why V-Nova won’t alter its licensing structure in the coming years to start making money from the wider industry, once momentum picks up.

That is purely skeptical. What we do know is that V-Nova’s strategy, for the first year of LCEVC’s post-standardization life at least, is more focused on building traction than it is about immediate economic return – as the responsibility of being a standard weighs heavily on the vendor’s shoulders.

So to summarize, the initial licensing plan is to target only the biggest streaming companies – those that can organically build video workflows by assembling open source and best-of-breed components. Then comes the rest of the market, which has fewer internal integration skills and so buys turnkey solutions from third-party vendors (such as the traditional encoding rivals to V-Nova, as well as the OVPs), which will come later. Eventually charging royalties to companies which were once so dismissive of V-Nova will be the oh-so-satisfying cherry on the cake.

These larger and “nimbler” players in the initial target bucket are better positioned to build custom video workflows, compared to buying professional systems either in the cloud or on-prem, which makes them ideal target customers for V-Nova. Not only are they likely to adopt LCEVC, but more of these types of companies are emerging – not just from new entrants but from the legacy side too.

Unfortunately for V-Nova, confusion is still rife in this world, including over why MPEG is launching three video codecs in the same year. There were three motivations to accelerate these new standards. Firstly, is the well-documented HEVC royalty disaster, with patent pools split three-ways. Secondly, was the arrival of AV1 as an alluring alternative to the established MPEG codecs, even though AVC and HEVC are not royalty free. Finally, and most relevant to LCEVC, is that encoding complexity of next-gen codecs like AV1 is driving up costs. So, quite simply, MPEG needed a rational royalty policy, as well as the technologies to compete with AV1, and a CPU-efficient alternative – eventually launching three new codecs to achieve these three goals in one fell swoop.

Given the deeply ingrained politics in the video codec ecosystem and the market’s tumultuous track record, we are skeptical of V-Nova’s LCEVC licensing scheme being without drama.

Meanwhile, it could be 2022 before the royalty policy for VVC is finalized, while EVC’s could be as late as 2023. There are all sorts of details involved with due diligence processes once a patent license administrator is selected, while EVC’s main profile being controlled by three companies (Samsung, Huawei, Qualcomm) should in theory mean a licensing scheme is settled sooner than most.