Digital Media

Impossible Questions that the New HEVC Advance License Terms Require to be Answered

by Avni Rambhia 23 Jul 2015
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HEVC Advance recently released its proposed licensing terms for HEVC compression technology. While the terms are intended to be fair, reasonable and transparent, they are actually going to be extremely difficult for many companies to honor. This is because they make assumptions on content businesses that may have been true in the days of regimented broadcast and structured Pay TV, but that are turned on their head in the age of the Internet and device-centric viewing. The key problem is there are no caps on licensing, so there's no "easy button" for compliance - every unit shipped and every stream monetized has to be measurable. And that's going to be a problem for many businesses. Here are five questions you need to be able to answer about your OTT business in order to accurately calculate your HEVC royalties under the currently  published terms. 

1. How many copies of your app were downloaded, installed and actually activated? From online video games, to video-chat clients, to OTT apps for tablets, phones, and TVs, billions of apps are downloaded each year. Many of these are web browser plug-ins. Very few, if any, of these are downloaded directly from a publisher's site. Our years of research show that very few app developers know exactly how many copies of their app are downloaded, or even what order of magnitude are downloaded. Statistics like active users are more measurable, but many services - particularly ad-funded ones - don't even track that. 

2. How much revenue can be attributed to a given video stream? Most content services had been projecting that between 5 and 15 percent of total streams delivered in 2017 would be compressed using HEVC. How is one to determine what percent of total realized revenue is to be allocated to each stream, especially when only a few titles or resolutions are coded in HEVC? Over time, it is extremely likely that the same stream will be encoded in both AVC and HEVC, and delivery networks (not the service provider) will pick the appropriate stream based on the device and the network. Additional complications in answering this question include differential ad revenues for different demographics and streams.

3. When do you become a "content service"? Applications of video are blurring the lines traditionally held between consumer and enterprise, and M&E and corporate applications. If a university hosts HEVC-compressed classroom videos on its website which in turn encourage students to enrol in classes, is this a licensable use case? If surveillance cameras send HEVC-compressed feeds to a cloud-based service that enables mobile-based monitoring, is that a licenseable use case? If a tablet is going to be used only for an enterprise classroom application, is it exempt from licensing because that is not a consumer use case as currently envisioned? 

Defining licensing terms is arguably easy. Complying with them is far more complex, and enforcing licensing terms can be nearly impossible when assumptions are not in sync with the way business is being done. We foresee interesting challenges, to say the least, for businesses to accurately estimate their royalties due to HEVC Advance under the current model. It will be even more interesting to see how patent holders move to enforce royalties given the challenges above. 

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