The UHD sector has continued its steady evolution over the last year; from a consumer perspective UHD is becoming commonplace with a variety of devices and distribution platforms now available. However, from an industry perspective there is still a significant amount of ongoing grappling with the technology, more specifically, justifying and providing the return on investment (across both hardware and content). The recent ratification of AV1 and the possible decision to break away from MPEG further highlights this.
Video compression has been dominated for decades by the Motion Pictures Experts Group (MPEG) in association with others, whilst in 2013, High Efficiency Video Codec (h.265 / HEVC) was published with an expectation of superseding MPEG4 with a 50% reduction on previous generation bandwidth requirements.
However, associated high royalty payments for HEVC and the coinciding of the tech giants invading the video space have resulted in the forming of the Alliance for Open Media (AOM). The roster includes Netflix, Google, Amazon, Facebook, Cisco, Microsoft, Nvidia, AMD and Apple. Collectively they have created AV1, a low-cost competitor to HEVC. Despite the combined force of these companies, HEVC momentum is building. At the end of 2017, there was a global installed base of over 225 million HEVC consumer devices, 175 million of which are TV-sets which alone will rise to 280 million by the end of this year.
So how and why will AV1 impact the sector? Is it deemed as an appropriate and sufficiently capable replacement for HEVC, or is it a strongarm tactic to force down to cost of existing patents?
HEVC’s make-up from several patent pools, including those beyond MPEG, have resulted in a disparate and in some instances, non-established licencing and royalty positions. This boils down to a wide set of parties seeking payment for their IP; causing an expensive, and uncertain roadmap of future costs. When combining this with the current inconclusive business case for broadcast UHD, it has led to limited industry investment and consequently limited availability of content for consumers.
The added competition of AV1 does appear to be having an impact, with the HEVC Advance patent pool dropping its royalty fee for non-physical streams, meaning Netflix, Amazon, Apple, Google and Co. can all stream 4K content without a per stream cost, making use of those 200 million+ devices with HEVC already inside. Furthermore, all cable, satellite, OTA broadcasters etc. all come under this too, that’s a lot of interested parties happy about this move. However, each of the 14.4 million UHD Blu-ray discs expected to be sold throughout 2018, are liable for royalty payments to other patent holders.
With HEVC already being adopted by the majority of the CE industry and close to de-facto feature of UHD TV-sets, displacement of the technology will be a significant challenge for any party – even with the power of the aforementioned FAANG & Co. behind it. And with an ever-rising installed base of hardware, royalties are sure to fall as patent pools can collect less from more. So, a more realistic scenario is one of cohabitation of HEVC and AV1 in devices, enabling operators to utilise whichever one is fit for purpose. Moreover, the threat of AV1 being used exclusively by the AOM giants is perhaps sufficient to encourage royalties to fall faster.
But more significant than all of this is the rate of consumer uptake and service roll-out of the technology. Without widespread deployment and without industry agreement, as we have seen on countless occasions before, the bubble can unfortunately be quick to burst.
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