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The H.264 Licensing Labyrinth

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Regardless of the technological questions that arise from the broadcast-market scenario, the annual broadcast fee is broken down by viewership sizes:
—$2,500 per calendar year per broadcast markets of 100,000–499,999 television households
—$5,000 per calendar year per broadcast market of 500,000–999,999 television households
—$10,000 per calendar year per broadcast market of 1,000,000 or more television households

Some might ask, "Why not just pay the per-encoder fee?" This might be the most feasible model for a cable or satellite delivery system, as the content could be encoded at a centralized location, multiplexed, and then transmitted across the network to multiple geographies within a single broadcast market. But for local OTA, there may be multiple encoders involved. In fact, for those who already have the digital OTA converter boxes, take note of the fact that many broadcast stations are sending out three or four signals per single traditional analog signal.

The other two issues here, somewhat addressed by MPEG LA, are the question of developing countries’ ability to maintain the fee structure and the corollary of countries that choose to assess a viewership tax on their television sets. Countries across Europe assess a viewership fee for OTA, and it brings up an as-yet-unanswered question.

MPEG LA’s approach on the issues of the developing countries is to footnote the issue, stating, "It is recognized that broadcasters in developing countries may have different circumstances to be considered."

Grazing the edge of the television viewership tax, MPEG LA also notes: "There may be AVC Video services that qualify as Free Television AVC Video rather than Subscription AVC Video or Title-by-Title AVC Video where a nominal (but no other) payment is required or where other relevant circumstances taking into account the nature of the video service may apply."

While both of these may mean a case-by-case basis, no details have been published.

Internet Broadcast
With all the issues around "free" television, why should someone involved in nonbroadcast delivery care? As I mentioned before, the participation fees apply to any delivery of content. After defining that "free" television meant more than just OTA, MPEG LA went on to define participation fees for internet broadcasting as "AVC video that is delivered via the Worldwide Internet to an end user for which the end user does not pay remuneration for the right to receive or view." In other words, any public broadcast, whether it is OTA, cable, satellite, or the internet, is subject to participation fees.

This is a big deal for those whose primary focus is distributing content on the web. It would be quite fair to say that those companies choosing the "give away content for free in hopes of getting advertising" business model together might want to think through their strategies.

Careful consideration should yield models that would work, but the point is this: Content encoded, distributed, and viewed by end users is subject to the participation fee, even if the viewership is advertising-driven or sponsorship-driven. There’s even a grey line around the use of content to drive donations, as it could be argued that these participation fees are due since the content was a compelling part of the donor’s decision to fund the not-for-profit.

The fees are potentially somewhat steeper for internet broadcasts, perhaps assuming that internet delivery will grow much faster than OTA or "free" television via cable or satellite. Adding the "free television" broadcast-market fee together with an additional fee, MPEG LA grants a reprieve of sorts during the first license term, which ends on Dec. 31, 2010, and notes that "after the first term the royalty shall be no more than the economic equivalent of royalties payable during the same time for free television."

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