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Rethink Technology Forecast is Bullish on VVC

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Rethink Technology Research's "Media & Entertainment Transcoding Workload and Device Royalty Forecast 2020-2030" is a well-reasoned, comprehensive, and illuminating report that puts numbers to its predictions and provides a sound basis for codec-related planning for the next ten years. Any company involved in content production, codec or encoder development, media delivery, or media consumption can benefit from its insights and predictions.

You can (and should) download the executive summary of the report here. Rethink also provided me with an abridged version of the final report of which I'll share a few details. Licenses for the full report start at $3,800 for 1 to 5 users.

By way of background, Rethink is an analyst firm that publishes the Faultline weekly report on the entertainment ecosystem and streaming media. Over the years, Faultine has offered a number of insightful articles about subjects that many other outlets tend to ignore or gloss over, like the marginalization of MPEG, Sisvel's AV1 and VP9 patent pools, and the potential for LCEVC to have an immediate impact in the codec market. So, not only does the report reflect new independent research performed for the report, it incorporates an ongoing deep knowledge of the codec market.

Rethink Report 1

Figure 1. Transcoding workload by codec over the next ten years.

Speaking of research, to produce the report, Rethink spoke with multiple stakeholders in the codec space to develop a timeline for codec deployment (see Figure 1). The report uses a ten-year timeline starting in 2020, which is appropriate because codec markets change very slowly. The report predicts video device sales during that time frame as well as the associated device royalties. All sales and royalty figures are presented globally and regionally with device royalties presented for the pollyannaish Total Addressable Market (all potential devices paying all royalties) and more-realistic Service Obtainable Market (expected royalties in all markets).

You see the codecs covered in Figure 1; interestingly, though Rethink did incorporate AV1 successor AV2 into their analysis, they excluded Essential Video Coding (EVC), one of the three codecs launched by MPEG in the 2020-2021 timeframe.

Figure 2 shows projected global device royalties, which excludes LCEVC because it only includes complete codecs, not codecs provided via an enhancement layer (I discuss LCEVC further below). The projections are surprisingly bullish on VVC, though expecting it to surpass HEVC in 2029 seems reasonable. Regarding VP9, AV1, and AV2 royalties, the report states, "we currently expect Sisvel to make significant headway in collecting these royalties, despite the protestations of AOMedia. Despite this, we still expect AV1 to grow significantly."

Rethink Report 2

Figure 2. Global video device royalties by the conservative Service Obtainable Market.

Interestingly, the report ties LCEVC's success to that of AV1 and AV2 and estimates that LCEVC will achieve about a 30% penetration by 2030. The report doesn't assign a dollar value to these royalties because V-Nova's royalty is not based on devices. Rather, V-Nova is targeting the content providers directly, which doesn't fit into the model used to estimate other royalties in the report.

On the whole, there's never been a more confusing time in the codec market, and the stakes are extraordinarily high, with Rethink projecting that well over $30 billion in codec royalties will be collected through 2030. Irrespective of whether this is revenue or expense to your organization you need data upon which to base your projections and business planning. Rethink's report is the only one of its kind AFAIK, and the firm's domain knowledge and research chops make it a must-read for all stakeholders in the streaming media ecosystem.

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