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The State of Video Codecs 2016

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Causevic and Fish posit that the true purpose of the Alliance might be to create “a dialogue among HEVC Advance and leading IP holders and implementers to arrive at terms that meet the needs of all key parties in each industry segment.” In other words, come to your senses and don’t kill the golden goose before it starts laying eggs. According to Streaming Media editor Eric Schumacher-Rasmussen, this was the talk at IBC—that the Alliance is purely a political move, designed to get HEVC Advance to back down. You’ll see in a moment whether this turned out to be the case.

4K at Under 2Mbps?

In October, Canadian-based Tveon Systems came out of the shadows, and in Videonet, claimed the ability to “deliver 4K-resolution UHD TV at below 2Mbps, and ‘true’ 1080p images at below 200Kbps.” In the article, CEO Scott Hayward explained that Tveon’s codec was based on building algorithms that showed how the brain interprets what the eye is seeing and how it is perceived, calling it a “persuasive-based” algorithm.

In a later article in the Broadcast Bridge, Hayward said Tveon is obtaining independent verification of its claims, with trials expected to start by the end of 2015, and the official launch of the codec toward the end of 2016. A quick check of the website in early January showed no further progress on either of these goals.

Back to HEVC

On Sept. 24, HEVC Advance issued a release stating that it was adding MediaTek as a member of the patent group and that it will “adjust fees to support widespread use of HEVC.” Then on Dec. 18, HEVC Advance issued new terms, which differed from the original terms in four key ways:

  • It would reduce the royalty rates on devices and institute an annual cap of $40 million.
  • It would eliminate the concept of royalties on attributable revenue and impose a content royalty (with a separate $5 million cap) only on subscription, pay-per-view, and digital media. There would be no royalty on free on-air or streaming video, even if it is advertising-supported.
  • It would provide a structured incentive (with both carrots and a big stick) for potential licensees to quickly adopt the new license structure.
  • It would provide a royalty credit of $25,000, essentially a de minimis exception for low-quantity use.

“The original pricing and structure was simply untenable, and it wasn’t just us; I think the entire industry felt that way,” Inzerillo, one of the harshest critics of the original terms, said at the time. “It definitely had a chilling effect, and HEVC might have lost 6 months from a development perspective. The new terms are structurally very encouraging, and far more in alignment with common practices and how companies think about pricing. It’s a lot closer to MPEG LA, whose terms were almost universally embraced.”

Inzerillo did caution that he hadn’t seen final licensing terms for indemnification, or how HEVC Advance would protect its licensors from third-party claims, or answers to other critical questions. But, at least from a business perspective, he found the revised plan workable.

HEVC Advance CEO Peter Moller cited, as motivation for the changes, “The first rate structure was impinging the adoption of HEVC, which was the complete opposite of what we hoped to achieve. Clearly our first structure didn’t satisfy many potential early adopters and we needed to fix that.” Regarding the impact of the Alliance for Open Media on the change, Moller explained, “The codec proposed by the Alliance didn’t motivate the change. But there are substantial companies in the Alliance who were refusing to adapt HEVC and said the terms were delaying adoption. That was motivating.”

The short-term impact of HEVC Advance’s first licensing pass is unclear; beyond Microsoft Edge, which according to www.netmarketshare.com had a 2.25 percent penetration as of December 2015, there are no browsers that support HEVC playback. Whether that would have changed had HEVC Advance initially proposed its second licensing package is anyone’s guess.

Though Apple has incorporated HEVC capabilities in multiple devices, starting with the iPhone 5, HEVC appears to be used exclusively for FaceTime, not for video decode, and HEVC is still not listed on any spec sheet. Though HEVC made its way into Android 5.0, this doesn’t seem to have triggered an avalanche of HEVC content to these devices. Clearly, HEVC is doing well for streaming 4K movies to SmartTVs, though only a handful of producers serve this market. But for the average company producing video for a website, HEVC is no closer today than it was in the beginning of 2015.

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Even Netflix can’t sustain more than 3.89 Mbps from these top tier ISPs. 

That said, it’s not like VP9 is being adopted en masse, though clearly interest was higher between the first and second HEVC Advance announcements. Perhaps it’s UHD that’s not making progress in the streaming space, which makes sense, since relatively few homes can sustain the 16Mbps download speed necessary for 4K, and few streaming producers other than subscription services can justify the bandwidth costs. Maybe 1080p at 4–5Mbps, or 720p at 2.5Mbps, both encoded with H.264, or even smaller, slimmer streams, are all the streaming market needs for now. After all, the Netflix ISP Speed Index still shows the top average sustainable data rate of 3.89Mbps. Some services are starting to cap bandwidth, which only increases pressure to make video streams as efficient as possible.

In that regard, perhaps now that the HEVC royalty issue is settled (other than the grassy knoll vision of a third royalty pool), we’ll start to see HEVC playback incorporated into more and more browsers, which will stimulate the use of HEVC for bandwidth reduction, as opposed to 4K delivery.

This article appears in the 2016 Streaming Media Industry Sourcebook.

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