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Heads Roll in a Time of Transition for the Online Video Industry
The future is up for grabs as viewers move from broadcast and cable to online, but will greedy royalty fees slow growth at a critical moment?

“It was the best of times, it was the worst of times.” So goes the opening line of A Tale of Two Cities, Charles Dickens’s serialized look into a very human inflection point in 18th-century London and Paris.

Dickens could have easily been describing a similar inflection point today, a future clouded with uncertainty: the shift in media delivery, consumption, and ownership. We’ve seen a rapid uptake in cord cutting, a modern-day severing of ties to the coaxial cables—and media companies that own such infrastructure— that once linked us inextricably to media consumption in the home.

As our modern-day guillotining of cable services continues unabated, we’ve seen the aftermath of a very uncertain future: Alliances shift as content owners seek substitute delivery approaches, with premium content following deals pitched by OTT or mobile device manufacturers—and even a few innovative content delivery services providers—as alternative ways to deliver views to an increasingly disjointed set of eyeballs.

If content is king, as we are fond of saying in the pages of Streaming Media, then perhaps the queen in the mix is the chosen delivery approach at a particular time.

As in Dickens’s tale, though, being queen might not be the best position in an uncertain future when it comes to balancing the cost of infrastructure to monetize content for premium content owners. Does one really want to invest in infrastructure when thousands of cord-cutting knives (and maybe a few knitting needles) are intent on separating the medium from the messages?

Another similarity—one that caused rebellion even in “safe havens,” such as Dickens’ England and the outlying colonies as well as France—was the question of unfair taxation.

In the streaming industry, when this type of potential taxation—in the form of licensing H.264 streaming playback—reared its head a decade ago, it was promptly and almost universally decried as a millstone around the neck of the industry’s attempt to soar. Licensing terms were delayed, then delayed again, allowing the very cord cutting we’re now celebrating as an industry.

Recent moves by a consortium of H.265 (HEVC) patent owners threaten again to slow growth at a point when we need to move quickly and decisively to offer long-lasting alternatives to traditional cable television media delivery.

The uncertainty has helped some companies, including one that I’ve been working with in a strategic advisory role, cash in on the confusion by offering ways to prolong the life of H.264 encoding. But the specter of undue HEVC licensing terms might be enough to shift the focus of the whole industry away from innovation and toward substitute approaches such as alternative codecs and delivery protocols.

There’s valid interest in the substitutes, or even of “breaking the codec,” as one IBC keynote described it, brought on by these new, seemingly onerous licensing requirements.

In Dickens’s story, as he is led to Saint Guillotine, the substitute hero sums up his resistance to conformance with a now-famous line: “It is a far, far better thing that I do, than I have ever done.” His propitiatory act, while being led to his chosen fate, meant an innocent man could go free.

In our modern times, it may be the role of one of these alternative codecs to stand in for the standards-based codecs, acting as a stop-gap as the standards-based codecs flee the shackles of costly licensing requirements. That may sound cynical, but it’s worth consideration.

If the patent owners were to relent on licensing terms for another 5 years—following the lead of H.264 patent licensees in practice, if not in spirit—these same patent owners may find themselves reaping a much better reward in 2020 rather than contributing to industry bloodshed in 2015.

This article appears in the October 2015 issue of Streaming Media magazine as “Licensing Our Future.”

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