For months now the 4K UHD TV world has been operating under a dark and potentially catastrophic cloud of uncertainty thanks to a major disagreement between the most important video streaming services - think Netflix, Amazon, Ultraflix and M-Go among others - and a group representing what most would agree is the most important streaming technology for the current 4K age: HEVC.
So far-reaching has this spat been that it had the potential to render all of the current 4K TVs more or less redundant if it wasn’t resolved. So as a 4K TV owner myself, I’m relieved to report that it appears that an agreement has been reached.
The changing face of HEVC
The issue that blew up pretty much out of nowhere back in the summer was caused by the emergence of a new negotiating group, called HEVC Advance, representing the many patent holders with a stake in the HEVC compression system. This new group - which claimed such big hitters as Technicolor, Dolby, Philips, General Electric and Mitsubishi Electric among its members - laid out royalty and licensing demands that were far more far-reaching and expensive than those operated by the previously dominant HEVC negotiating group, MPEG LA.
Even mighty 4K TVs like the Sony 75X940C could have had their usefulness hugely reduced if the HEVC... [+]
Particularly problematic was the inclusion in the HEVC Advance scheme of content producers and video streaming services - parts of the AV world that had not been required to pay licensing fees under the previous MPEG LA royalties arrangement. Also, the HEVC Advance wanted to scrap the caps MPEG LA had placed on the amounts individual royalty paying organisations would have to pay.
The new price of streaming
Under the terms of the new HEVC Advance scheme, for instance, the video streaming services would be looking at having to pay 0.5% every month for every 4K-related subscription on their books. So Netflix would have to pay around $0.06 a month for each subscriber to its $11.99 UHD package, while Amazon would be looking at around $0.50 per annum for its $99-a-year Prime subscribers.
These numbers don’t look too high in themselves, but multiply them by the numbers of subscribers involved and it’s easy to see why the streaming services would be unhappy at suddenly having to fork over eye-watering amounts of money for something they’d previously not had to pay anything for. Especially given that they had built their 4K streaming services on the HEVC H.265 codec on the assumption that this would be licensed on more or less the same terms arranged by MPEG LA group for the previous H.264 system.
It’s easy to see why the HEVC Advance group might want some of the 4K streaming action given the sort of money the big streaming players are making at least partly on the back of the H.265 technology. And you can see, too, how the HEVC Advance group might have thought it had the content producers and streaming platforms over the proverbial barrel given how invested they already are in the H.265 system.
HEVC is not the only compression fruit
However, while shifting away from H.265 would undoubtedly be a huge technical and commercial challenge for the streaming platforms, the bottom line is that there are alternative compression technologies out that they could convert to - most notably Google’s VP9 system. So the video streamers don’t HAVE to use H.265, however much the HEVC Advance group might think they’d want to.
Why did all this mess threaten the usefulness of 4K TVs in the market? Because the sets that support 4K streaming have been equipped with HEVC H.265 decoders to handle the streams of Netflix, Amazon’s and others. So if those key video streaming platforms decided to switch their compression systems to a rival format like VP9 in response to the HEVC Advance demands, owners of the current crop of 4K TVs could well find themselves no longer able to play 4K streams from the world’s biggest streaming services. Not a pleasant thought given that these streaming services are still pretty much the only source of native 4K content right now.
So it really is a relief to hear via a Friday (December 18) HEVC Advance press release about a new updated royalty payment plan that the parties involved - who clearly need each other, when it comes down to it - appear to have come to an agreement that secures HEVC as the lead 4K video streaming compression platform.
The deal is done?
While the press release doesn’t specifically name-check any of the organizations that may now be onboard with the new HEVC terms, HEVC Advance CEO Peter Moller is at pains to stress that the new royalties rate plan it’s announcing is the result of listening to its ‘customers’:
"After our initial pricing announcement we reengaged with key segments of the HEVC community, including content owners and distributors as well as device manufacturers, to better align our licensing structure and rates with the industry's long-term technology goals. We are pleased with the results of our industry engagement and confident that the revised pricing structure and rates balance the needs of both HEVC users and patent owners."
Looking through the provided information about the updated royalty structure, the following snippet jumps out: “The commercial content distribution structure has been adjusted to provide a simplified royalty rate structure with substantially reduced pricing.” What’s more, the updated payment scheme also now includes royalty caps for both content distributors and devices.
While it is extremely important to stress again that no particular streaming services are name-checked by HEVC Advance, it’s hard to imagine that the group would have issued the release and used the sort of language Peter Moller uses if the new pricing structure hadn’t met with the collaborative approval of at least most of the key video streaming players.
I’ve reached out to Netflix, Amazon and HEVC Advance for confirmation, and will update this story accordingly if I hear back from them.
Benefits beyond the streamers
Also catching the eye in the HEVC Advance release is another huge change to the latest royalty payment plan that has equally far reaching implications for the continued positioning of HEVC at the heart of 4K distribution infrastructure: the “waiving of royalties for public/non-profit TV broadcasting, and content distribution that is free to end-users including over-the-air commercial TV broadcasting and internet content distribution”.
Finally, the HEVC announcement additionally reveals a new incentive program for existing and future HEVC/H.265 users that complete the HEVC Advance licensing process within a 12 month period. “The program includes a substantial discount for prior sales by existing HEVC device and content distribution providers,” the announcement states, “as well as an ongoing discount during the initial five-year license agreement term.”
What this all adds up to, we’d hope, is a much more stable outlook for 4K distribution that makes it easier for consumers to invest with confidence in what should now be ever more affordable 4K products and services.
