HEVC Advance Scrapped Content Fees on ‘Anecdotal Evidence’ They Hurt Adoption, Says CEO
HEVC Advance, the H.265 patent pool now in its third year, decided to stop imposing royalties on content distribution services after hearing “anecdotal evidence” the fees may have been impeding industry adoption of the compression technology, CEO Pete Moller told us. HEVC Advance’s secondary hope is that the decision, announced Tuesday, will encourage other H.265 licensors to stop collecting content royalties or declare their intentions not to pursue them, and thereby “energize the market” for all, said Moller.
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The market “is not seeing the level of HEVC adoption that everybody wants, everybody expects, and the question is why?” said Moller. Though he isn't certain whether content fees have been an impeding factor, “it’s potentially a reason why people are not adopting as fast as they otherwise would, and we wanted to eliminate, frankly, any barriers for people to adopt HEVC and get all these benefits out to consumers.”
In launching the “initiative here to eliminate that barrier, if there is one,” the hope at HEVC Advance is that “this will energize people to adopt much faster than they have been,” said Moller. The pool’s other hope is that “others in the industry use this as an opportunity to call for those people on the sidelines -- people like Velos and others -- to announce that they will also not seek royalties on content distribution,” he said.
Velos Media is the one-stop-shop H.265 patent pool that founding members Ericsson, Panasonic, Qualcomm, Sharp and Sony announced a year ago. That Velos has released only “cryptic” statements that make no commitment to seeking content royalties, but don’t take them off the table, either, does a disservice to industry H.265 adoption, said Moller. “We hear anecdotal evidence that some people are reluctant to adopt because of content distribution fees, and not just from us,” said Moller. “There’s other people on the sidelines that have not declared their intentions.” By eliminating the content fees, “we want to do our part, and we hope others do it as well,” he said.
Early indications were Velos Media won’t soon abandon its neutrality position on the content royalties question. “Velos Media is currently offering licenses to end user product companies that manufacture and sell HEVC-enabled devices,” spokeswoman Sophie Skaggs emailed us Wednesday. “As it relates to content, we are continuing to assess the market to fully understand the dynamics of the ecosystem and ensure that our model best supports the advancement and adoption of HEVC technology.” It was essentially unchanged from the policy statement on content royalties it issued nearly a year ago.
Moller’s insistence that taking H.265 content royalties off the table would benefit all is a far cry from the opinions he expressed three years ago when he defended the terms in HEVC Advance’s first royalty rate card (see 1507220001). HEVC Advance believes “every beneficiary” of H.265 technology “should pay a fair and reasonable royalty rate,” Moller said then of the group’s rationale in imposing royalties on content. Though H.265 content under the MPEG LA license is and always has been royalty-free, “it’s HEVC Advance’s belief” that the days in which device manufacturers foot the bill for the content owners are over, he said then. “Video content providers today are some of the companies that are benefitting the most from H.265.” HEVC Advance later softened its position, offering content royalty “waivers” for broadcasters and streaming services that don’t collect subscription fees (see 1512210034).
Looking back on those statements, Moller doubts “we would do anything differently with the facts that we had at the time,” he said. “Clearly, if we look at the situation today, the consensus among the people we spoke to was, 'Let’s do what we can to eliminate the barrier.'” The royalty rates on content “were never really high, but there is a perception that they are a barrier, and let’s remove it,” he said. HEVC Advance “would have to be blind” to deny there was at least “some” industry “pushback” against the content fees, he said. “We don’t think it makes sense for the industry, for consumers, for the marketplace at large for us to continue down this path” of content fees, he said.
HEVC Advance in its Tuesday announcement also disclosed a change in its royalty rate structure for devices embedded with H.265 that “essentially" caps the rates out at a 1 percent royalty on the per-unit cost of the device, said Moller. The new rates are retroactive to Jan. 1, he said.
The patent pool “got feedback from a lot of people who were participating in the $20-$80 market -- basically low-priced devices -- that simply said to us that an 80-cent royalty on a $41 item was too burdensome,” said Moller. “Frankly, we listened. We’ve always wanted to find that balance between licensees and licensors. It became pretty clear to us that our rate structure, when it exceeded 1 percent on the cost of the device, did incur to some extent a burden on companies and we decided to make that change.”