High Efficiency Video Coding (HEVC) is widely associated with the rollout of 4K or Ultra High-Definition (UHD) television service. Without the bandwidth savings that the compression technology delivers, there's no practical road forward for UHD TV deployments.
However, the organization HEVC Advance appears to have thrown up a roadblock in deployment plans.
Among several announcements this week -- including a new CEO and the appointment of an independent patent evaluator -- HEVC Advance released a new pricing schedule for companies that want to license HEVC patents from a patent pool that the organization is working to define. Several companies are expected to participate in the pool, including 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). But HEVC Advance will only begin assessing patents for inclusion starting on August 1. Despite the lack of technical details, the organization has determined how much money companies should pay to take advantage of HEVC technology.
Specifically, in major global markets like the US, Europe and Japan, among many others (referred to as Region 1), HEVC Advance expects licensing fees to equal: .5% of attributable revenues for content owners; $1.50 per unit for TV sets using HEVC; $1.10 per unit for connected devices like set-tops and computers as well as software for media delivery; and $.80 per unit for mobile devices.
Frost & Sullivan analyst Dan Rayburn finds numerous problems with HEVC Advance's proposal.
Calling the licensing terms "unreasonable and greedy," Rayburn compares the costs to fees charged by another HEVC licensing body MPEG LA. MPEG LA charges $.20 per unit for consumer electronics devices after the first 100,000 units each year up to a current maximum of $25 million*. Content owners pay nothing.
In Rayburn's analysis, the role of content owners is a major factor. He points to historical attempts to get content owners to pay codec licensing fees and their ultimate failure. Even .5% of total revenue is a huge amount of money, and not something content owners are willing to part with… whatever HEVC Advance may think.
"The fact that they think someone like Facebook, Apple or Netflix is going to hand over tens if not hundreds of millions of dollars to them, each year, shows just how delusional they really are," says Rayburn.
Rayburn also notes that while HEVC Advance only plans to apply licensing fees to consumer applications initially, it hasn't dismissed the idea of imposing them on business applications like video conferencing as well.
Light Reading requested comment from HEVC Advance on Rayburn's analysis, but there was no response by press time.
Ultra HD TV is expected to be successful in the long run, but the industry has struggled with finding a cost-effective approach for early UHD TV delivery. If HEVC Advance becomes another cost burden, the timeline for deployments is likely to slow even further. And that's not something anyone in the industry wants to see. (See Fuzzy Outlook for Ultra HD.)
*Note: This story has been edited slightly from a previous version for pricing accuracy.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading