MPEG LA Relaxes MPEG-4 Royalty Rates
by Curtis Lee Fulton (G2 News)
July 22, 2002
MPEG LA, a Denver company that acts as an IP clearing house for MPEG-2, MPEG-4, IEEE 1394 and other multimedia standards, has re-jiggered its MPEG-4 royalties schedule after being harshly criticized by copyright owners and software developers.
At the beginning of the year, MPEG LA said it planned to charge developers 25 cents per MPEG-4 encoder or decoder plus two cents for every hour of commercial use. MPEG-4 is a video compression standard that's more efficient than its predecessor, MPEG-2. New digital media products like set-top boxes and streaming video software are likely applications for it.
It was that "two-cents-an-hour" business that irked ISVs. The Internet Streaming Media Alliance (ISMA), a standards body backed by Apple, Cisco, IBM, Philips and Sun that's attempting to hammer out a streaming media standard, said it didn't think the hourly charges would work and that content providers wouldn't accept it. To underscore the point Apple delayed the release of its QuickTime 6 video format claiming MPEG LA's rates were unreasonable.
ISMA, however, said it believed the licensing issues would get ironed out and continued to endorse MPEG-4.
Well, it looks like they have been. MPEG LA has cut MPEG-4 royalties and Apple has released QuickTime 6.
MPEG LA's new MPEG-4 licensing terms are 25 cents a subscriber or two cents an hour and are capped at $1 million a year. Content owners with less than 50,000 subscribers pay no royalties. The fees apply to web site operators that benefit commercially from using the technology through ads or subscriptions.
The fees aren't retroactive as once feared so companies like DivxNetworks and RealNet-works that developed MPEG-4 based technology don't owe MPEG LA any back payments. Developers can use MPEG-4 in their products through 2002 without a license.
Standards like MPEG-2 and MPEG-4 are based on technology from a large collection of independent patent owners. Before software developers or content owners can legally use a standard, they need permission to implement the technology covered in each patent. Companies seeking to use MPEG-4 are free to pursue individual agreements with each patent owner and bypass MPEG LA. MPEG LA simplifies the licensing process. A business that needs to license MPEG-4 can simply cut MPEG LA a check, and MPEG LA will distribute the funds to the patent owners.
Widespread acceptance of MPEG-4 has important implications for the digital media industry. If software developers reject MPEG-4, Microsoft could rule the roost.
Microsoft doesn't support MPEG-4 and claims its Windows Media format is superior.
MPEG-4 is not a specific compression codec. It's a standard that specifies how compressed media is arranged and how individual compression codecs work with different playback systems. Codec makers do not have to write their own client, or player, if they use the MPEG-4 standard for their codec. RealNetworks' media format, for example, could be used in a QuickTime player if both the player and the codec were MPEG-4-compatible and Real, by the way, says it will support MPEG-4 in future versions of its technology.
Similarly, Microsoft's Windows Media player, which has the tremendous advantage of coming installed on just about every Windows desktop - Sounds like the Netscape wars, doesn't it? - supports a pluggable codec system that can bring in third-party compression systems.
Video compression makers such as DivxNetworks have released versions of their compression codecs that can be loaded into Microsoft's Media Player. If codec makers are forced to release Windows Media-compatible codecs to compete with Microsoft's Windows Media Video or Audio codecs, then MPEG-4 looses its relevance. Third-party codec makers don't have to pay royalties to Microsoft, and content providers won't have to pay either, except the fees they're paying to use a particular codec.
Internet content providers complain that there's no standard for streaming video. They have to cobble together a lousy JavaScript pop-up window that's supposed to unify the various streaming clients, but that means licensing streaming servers and encoding software from disparate vendors. Often sites will have multiple versions of files encoded in Microsoft's Windows Media, RealNetworks' RealAudio and RealVideo and Apple's QuickTime.
While Microsoft and its rivals drool at the thought of controlling the streaming technology from the encoder through the server to the client, each has a large enough market share to make that outcome unlikely anytime soon. The standoff irritates consumers and content providers, who just want a single standard that works every time without any fuss. MPEG-4 is supposed to be the answer to the problem.
By the way, MPEG LA doesn't stand for MPEG Licensing Authority although it could since that's what it does. It also doesn't stand for MPEG Los Angeles since its headquarters are in Denver. Actually, MPEG doesn't even describe what it does since it also licenses other multi-company patented technology like Firewire and IP owned by Canon, Columbia University, France Telecom, Fujitsu, General Instrument Corporation, GE Technology Development Inc, Hitachi, KDDI, Matsushita, Mitsubishi, NTT, Philips, Bosch, Samsung, Sanyo Electric, Scientific Atlanta, Sharp, Sony, Thomson Licensing SA, Toshiba and Victor Company of Japan Ltd.