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The H.264 Licensing Labyrinth

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One almost-universal truism in the world of streaming media is that licensing particular technologies can be a confusing and somewhat Byzantine process. MPEG-4 and H.264 licensing, in particular, have received the brunt of the disaffection born from confusion. Equal uncertainty abounds for the proprietary codecs, which use licensing models that are not publicly disclosed. Those who sell proprietary codecs use the perception of H.264 licensing as a labyrinthine ordeal as an ideal marketing tool to complement the proprietary technology’s "simple" license.

Most impacted, though, are the content owners and content distributors who express a common opinion about the licensing process: While necessary, at least as far as they can tell, it can be a convoluted process to even understand the licensing, enough so that it distracts from the real focus of creating, encoding, and distributing content.

Part of this fear, uncertainty, and doubt comes from misinformation about the types of licenses and the thresholds required for such licenses. If you do a Google search, you’ll find many of the top documents on H.264 licensing center on the 2003/2004 time frame, a point at which the license terms were in a state of disarray.

Much of the confusion stems from this era, with some "urban myths" persisting from documents that are readily available online appearing to be part of the legitimate final license issue. To better understand the issues, let’s first take a look at the H.264 licensing entity.

MPEG LA bundles license portfolios together for ease of licensing. The company’s most famous license portfolio was for MPEG-2, which was used in everything from DVD players to satellite television boxes. When the MPEG-4 portfolio appeared, though, the MPEG LA consortium didn’t come out of the gate with the same clarity of purpose and transparency of licensing terms as it had with MPEG-2.

MPEG LA’s H.264 licensing approach learned a bit from the MPEG-4 debacle, but it still didn’t reach the ease of understanding it had with MPEG-2. The fault is not all MPEG LA’s, as some patent holders disliked the way that their parts of MPEG-2 were handled, and they subsequently made it more difficult to aggregate the block of licenses together into a single portfolio. Having said that, MPEG LA did expand some of its licensing reach (we’ll talk about one license specifically) when it came to final licensing, which also caused a bit of industry consternation.

Remembering that the H.264 codec can be scaled down to mobile, scaled up to high-definition, and used as a low-latency messaging, videoconferencing, or broadcast-delivery methodology, let’s shift now to the licensing vehicle. We’ll look briefly at an overview of the final H.264 licensing terms from MPEG LA, based on a summary document provided at www.mpegla.com/ avc/AVC_TermsSummary.pdf.

MPEG LA splits the H.264 license portfolio into two sublicenses: one for manufacturers of encoders or decoders and the other for distributors of content. The biggest uncertainty comes from the distribution side. Since there are very few companies that manufacture codecs, we’ll focus strictly on the distribution side, where content is encoded, transmitted to the end viewer, and then decoded for viewing.

Licensing Categories
The sublicense on the distribution side gets further split out to four key subcategories, two of which (subscription and title-by-title purchase or paid use) are tied to whether the end user pays directly for video services, and two of which ("free" television and internet broadcast) are tied to remuneration from sources other than the end viewer.

‘Free’ Television
Looking at the sublicenses from last to first, the "free" television broadcasting approach has caused particular uncertainty—great enough that it led, in part, to a suspension of some fees until 2010.

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