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HEVC Advance Adds MediaTek as a Member and Plans to Adjust Fees

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According to Wikipedia, the expression ‘burying the lede” refers to the failure to mention “the most important, interesting, or attention-grabbing elements of a story in the first paragraph.” Well, HEVC Advanced definitely buried the lede in its latest press release, which was nominally about the addition of MediaTek to the HEVC Advance patent pool. However, the most interesting and significant statement was in the final substantive sentence, a quote from CEO Pete Moller which read, “We have received significant market feedback, particularly on content fees, and will adjust fees to support widespread use of HEVC.”

As for the exact adjustments planned, that’s all we know. StreamingMedia.com asked if HEVC Advance would discuss its plans for updated pricing, but heard back that the company is “gathering feedback from stakeholders in the marketplace,” and will keep us posted.

Presumably it will talk with Joe Inzerillo, executive vice president and chief technology officer for MLB Advanced Media (MLBAM), who recently commented on the concept of a content royalty with Fierce Cable, stating, "The notion of gross revenue is the part that's just a non-starter. If it was just another toll to pay and the toll was sort of reasonable … that wouldn't be such a big deal. But the gross revenues ... no mainstream company is ever going to do that." 

While the press has skewered HEVC Advance for attempting to charge content royalties, Inzerillo is one of the few potential licensees to publicly share his concerns.

One has to wonder if the formation of the Alliance for Open Media on August 31 motivated HEVC Advance to reconsider its terms. Briefly, the Alliance consolidated the codec development efforts of Google, Cisco, Mozilla, and Xiph, promising to deliver a royalty-free codec by early 2017. There is precedent for an open-source codec influencing the monetization policies of a standards-based codec; most famously, MPEG LA declined to seek royalties on free Internet video encoded with H.264 soon after Google open sourced VP8. MPEG LA has consistently denied the connection, and HEVC Advance likely would as well, but the timing argues differently.

Whatever the motivation, HEVC Advance rethinking royalty terms is a positive step, though not a panacea. For example, the announcement does nothing to allay another major concern regarding HEVC Advance’s patent portfolio, specifically, that no one knows which patents it includes. While MPEG LA includes a complete list of licensors and patents, HEVC Advance says its definitive list of licensees is “coming in the near future,” and that “certain illustrative claims of the HEVC Advance essential patents can be viewed soon.” These gaps were understandable in March when the group was announced, but are inexcusable six months later. 

Beyond HEVC Advance, the potential for a third HEVC royalty pool is real enough to discourage many potential HEVC licensees from adapting the new technology until the group emerges and announces its terms. Since the Alliance codec may offer a royalty-free alternative, the HEVC IP owners have some fence-mending to do to woo potential users. 

Now, onto the other news in the HEVC Advance announcement.

Oh, Yeah, MediaTek Joined HEVC Advance

When HEVC Advance formed, there were five potential members: GE, Technicolor, Dolby, Philips, and Mitsubishi Electric. Now, MediaTek makes six. Briefly, MediaTek is a Taiwanese fabless semiconductor company with over $6.5 billion in revenue in 2014. The company designs systems-on-a-chip (SOCs) for multiple uses, including mobile devices. For example, the MT8127 SOC is a quad-core SOC for tablets with hardware-based HEVC playback, and is deployed in Amazon’s Fire 7 tablet

The HEVC Advance press release states that MediaTek “is one of the leading contributors to the creation of the HEVC/H.265 video compression standard, with one of the most significant HEVC/H.265 patent portfolios in the world.” Again, since the patents aren’t listed, it’s hard to verify these claims. For the record, MediaTek was not in the MPEG LA H.264 patent group, though obviously that doesn’t mean it doesn't own any HEVC-related IP.

Additional IP owners joining the group is an endorsement of its direction, which is a positive for HEVC Advance. More than any other member, MediaTek appears to be a high-volume manufacturer that will actually have to pay significant royalties to HEVC Advance’s pool.

This is interesting because the characterization of the MPEG LA group, which includes manufacturers like Apple and Samsung, is that it includes high-volume HEVC licensees that favor a relatively low per-unit royalty and cap. In contrast, before MediaTek, HEVC Advance was categorized as including non-manufacturing (or low volume) owners that prefer to fully monetize their IP. MediaTek joining HEVC Advance suggests that if you’re going to pay high royalties for HEVC, it makes sensee to be in the group that grabs the largest share.

We don’t know if HEVC Advance will change its encoder/decoder royalty policy or just the content royalty. We also don’t know if either policy will withstand a FRAND challenge—proving itself fair, reasonable and non-discriminatory—as technologies that are a component to a standard are required to be. But MediaTek’s decision shows that at least one HEVC IP owner prefers the group with the more aggressive, beg-for-forgiveness-not-permission policy. 

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