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HEVC Advance Backpedals on Licensing Fees

Mari Silbey
12/21/2015

After much hue and cry, the organization HEVC Advance, which plans to license patents related to the High Efficiency Video Coding (HEVC) compression standard, has taken a step back on fees it proposed last July.

Responding to significant industry criticism, HEVC Advance has not only reduced royalty rates, but also capped fees for both hardware manufacturers and content distributors. HEVC is expected to play a critical role in the rollout of Ultra HD video, but industry players have worried that high licensing fees could slow adoption of HEVC and thus deployments of UHD TV.

The new terms proposed by HEVC Advance decrease licensing fees in major global markets like the US, Europe and Japan from $1.50 per unit for TV sets to $1.20 per unit; from $1.10 per unit for connected devices like set-tops and computers to $0.80 per unit; and from $0.80 per unit for mobile devices to $0.40 per unit. Fees top out at $30 million for mobile devices, and $20 million for TVs and connected devices. A combined cap of $40 million applies across all three categories.

"The marketplace was telling us strong and loud that caps were necessary," said Pete Moller, CEO of HEVC Advance, in an interview.

In addition to fees imposed on hardware (and related software apps), HEVC Advance is also targeting content providers. Originally, the organization planned to collect 0.5% of attributable revenues from content owners, but Moller acknowledged there were complaints that attributable revenue would be too difficult to calculate, and that proprietary information could be revealed in the process.

Instead, HEVC Advance is now proposing a fee schedule that would collect $0.25 per subscriber to any subscription cable, satellite TV or over-the-top video service. It would collect the same per title sold or rented, and the same per unit for any physical media like a Blu-Ray disc. Fees are capped at $5 million.

In comparison, another HEVC licensing body MPEG LA charges $0.20 per unit for consumer electronic devices after the first 100,000 sold, with a cap of $25 million. There are no fees for content owners.


Want to know more about pay-TV market trends? Check out our dedicated video services content channel here on Light Reading.


Frost & Sullivan analyst Dan Rayburn called the initial pricing terms proposed by HEVC Advance "unreasonable and greedy." In particular, he suggested that content owners would be loath to doling out fees as a percentage of revenue. (See HEVC Advance Could Hurt 4K TV Advancement.)

Several industry leaders also responded to the original fees with an announcement that they have created their own Alliance for Open Media with plans to develop an advanced, royalty-free video codec. Members of the Alliance include Amazon.com Inc. (Nasdaq: AMZN), Microsoft Corp. (Nasdaq: MSFT) and Google (Nasdaq: GOOG), among others. (See New Alliance Aims at Royalty-Free Video Codec.)

Companies participating in the HEVC Advance patent pool include General Electric Co. (NYSE: GE), Technicolor (Euronext Paris: TCH; NYSE: TCH), Dolby Laboratories Inc. (NYSE: DLB), Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) and Mitsubishi Electric Corp. (Tokyo: 6503). HEVC Advance has also published a list of patents included in the pool today. While there are nearly 500 at launch, the organization expects that number to double or even triple within six months.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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Mitch Wagner
Mitch Wagner
12/21/2015 | 11:41:42 AM
Politics
Interesting politics. Arguably, HEVC won't go anywhere if content providers don't sign on, so charging content providers might be foolish. On the other hand, content providers might see an opportunity here and be willing to pay. And Netflix seems to be missing from the rival standards group. 
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