A closer look at the costs (and fine print) of H.264 licenses

A closer look at the costs (and fine print) of H.264 licenses

Summary: I read license agreements so that you don't have to. In an update on its decision to remove H.264 support from its Chrome browser, Google cites "significant royalties" as a contributing factor. Just how much are those fees, and who pays? I've got the answers.

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I read license agreements so that you don't have to.

This weekend, I've been digging deep into the agreements that govern your right to encode and decode video content using the AVC/H.264 standard. Google's announcement last week that it intends to remove H.264 support from its Chrome browser didn't mention the word money at all. The original terse announcement raised more questions than it answered, which led Google product manager Mike Jazayeri to follow up on Friday with a second blog post, four times as long as the original. This time, he didn't duck the subject of pay-to-play and H.264:

To use and distribute H.264, browser and OS vendors, hardware manufacturers, and publishers who charge for content must pay significant royalties—with no guarantee the fees won’t increase in the future. To companies like Google, the license fees may not be material, but to the next great video startup and those in emerging markets these fees stifle innovation. […]

Our choice was to make a decision today and invest in open technology to move the platform forward, or to accept the status quo of a fragmented platform where the pace of innovation may be clouded by the interests of those collecting royalties. [emphasis added]

That raises a host of interesting questions that can only be discussed intelligently if one understands exactly who's paying, and how much. The group that licenses the AVC/H.264 patent portfolio, MPEG LA, publishes a summary of the license terms. I first looked at that document last May and published an analysis here, in H.264 patents: how much do they really cost? This post is an update to that information.

The agreement that I examined last May expired a few weeks ago, at the end of 2010. The renewed agreement, which is now available on the MPEG LA web site (PDF format) covers a five-year term from 2011 through 2015. According to the document properties, this version was last updated on January 5, 2011.

Using Microsoft Word, I compared the January 2011 version with a copy I saved back in May 2010. This post summarizes the current licensing terms and points out one eyebrow-raising change, which literally appears in the fine print at the end of the document.

To use H.264 features, you must have a valid license for MPEG LA's AVC/H.264 Patent Portfolio License. This is how the MPEG LA describes that portfolio:

[E]ssential patent rights for the AVC/H.264 (MPEG-4 Part 10) digital video coding standard used in set-top boxes, media player and other personal computer software, mobile devices including telephones and mobile television receivers, Blu-ray DiscTM players and recorders, Blu-ray video optical discs, game machines, personal media player devices, still and video cameras, subscription and pay-per view or title video services, free broadcast television services and other products. To align with the real-world flow of AVC/H.264 commerce, reasonable royalties are apportioned throughout the AVC/H.264 value chain.

Chances are, you're already licensed to use AVC/H.264. You may even have paid, indirectly, several times on a single PC.

MPEG LA neatly divides its customers into two categories and publishes royalty rates for different groups within each category.

Group (a) consists of companies that "manufacture and sell AVC encoders and decoders,” typically as part of a hardware or software product. These companies pay MPEG LA for a license. In exchange, their customers get the right to use the codecs supplied with that software “for personal and consumer (including internal business) purposes without remuneration but not for other uses.” The parenthetical language about internal business use was added in the most recent update.

Group (b) applies to “video content or service providers,” who need sublicenses to use AVC encoders and decoders to deliver H.264-formatted video that does not fall under the "personal and consumer" license.

On the next page, I take a closer look at what H.264 licenses really cost software companies like Google.

Page 2: Who pays for an H.264 license? And how much does it cost? -->

 

Topics: Google, Hardware, Legal, Mobility, Software

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25 comments
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  • "I read license agreements so that you donâ??t have to."

    And this is why I love reading your posts and I've been following your blog for years.

    Keep posting on a regular basis, you're a true journalist in a field of people who can operate gadgets but can't analyse a legal document, a business report, or even a press release.
    LB75
  • RE: A closer look at the costs (and fine print) of H.264 licenses

    Well that explains why I support this move by google. However, I think they need to get on the ball with WebM project. WebM should be a technologically superior codec to h.264 and h.265.
    AdonisSMU
    • Please explain

      Good post Ed.

      AdonisSMU: How has what Ed's posted support Google's move?

      The license fees are small change and the fee increases for the next 5 year are capped at 10%.

      WebM isn't technically superior to H.264, it's not even as good, and has zero hardware support (which takes a very long time).

      In addition WebM are likely to be patent encumbered, google doesn't provide patent protection, nor is their a way to easily license such patents.

      Where's the support for Google's move?
      Richard Flude
  • The fact that there is even "fine print" is the problem

    Do you remember the 27-page legal contract you signed when you bought that Sony Trinitron back in the 90's? Or the 10-page contract you had to agree to before playing Scrabble for the first time? Neither do I.

    But the corporations who started with "shrink-wrap" licenses for software have now built them into almost every consumer gadget imaginable, including TVs, media players, and even car stereo systems. That's not to mention every computer, cellphone and website on the planet.

    The upshot is that the average "techie" consumer is now party to hundreds or thousands of new contracts each year, and is responsible for knowing and following the letter of each of those contracts. Are they enforceable? Yes, according to most law professors surveyed in a 2006 Carnegie-Mellon study. Even if the contracts (sometimes known as "EULA" or "Terms of Service") have one-sided or egregious terms, they can be enforced to the extent of giving the average consumer pains in both the head and the pocketbook.

    My dad always told me to read before I sign, but that is no longer even physically possible in today's world. You are faced with the choice of spending half of your waking hours reading contracts, or simply becoming a Luddite and eschewing the technological world altogether. The chances of getting any legislative relief are zero, in fact the opposite is true: Congress is bent on weakening more consumer rights and favoring their corporate donors and the legal profession.

    Will it change? Maybe, by the time contracts have started including clauses granting the corporations unlimited access to your bank account and <i> ius primae noctis </i> (look it up) for your daughters.
    terry flores
    • Enforcement questionable

      Terry there's substantial evidence the Eula would not be as enforceable as often proclaimed. But even if they are you must consider likely damages awarded for breaches. An individual offending a clause in their h.264 license is unlikely to be causing recoverable damage beyond the license fee, a manufacturer or distributor one the other hand is a target worth persuing.

      This is recognized in the minimum license clauses.

      Just click agree and move on, unless you're looking for prizes:

      http://yro.slashdot.org/article.pl?sid=05/02/23/2315211
      Richard Flude
    • RE: A closer look at the costs (and fine print) of H.264 licenses

      @terry flores
      I hope someone would challenge the validly of the agreements very soon. On the basis that every body knows the users don't read them and practically can't. On the basis that there are other way to do this and the sellers don't use them. In a way they hide their contracts in a lot of words offered in an inconvenient moment. Like when users are installing, not when users are selecting a product.

      I hope that may inspire the creation of a limited number of certifications for those agreements. Certifications about property's of those agreements that everybody can understand fast.
      bezoeker
    • Exactly

      @terry flores

      There are things which are more important than money. FREEDOM for one.

      The idea of making an encumbered codec a web "standard" is insane.

      Software patents will ensure that the US ceases to be the World's technology innovation leader.
      Tim Patterson
    • in the modern liberated world of ours

      the ius primae noctis will apply to all of our children.
      in fact, it already is - they are being screwed by ever so hungry lawers without even knowing it.
      ForeverSPb
  • RE: A closer look at the costs (and fine print) of H.264 licenses

    "A company that sold or gave away 200 million licensed products in a single year would see its bill triple, paying roughly $22 million at the 11-cents-per-copy rate."

    That would be a fun problem to have.

    By the way, excellent post.
    Rich Miles
  • RE: A closer look at the costs (and fine print) of H.264 licenses

    ifunia encode and decode video for apple users with H.264 standard in most of their products, but not pay any sort of fees to them.
    John Titlow
  • Stop the insanity of software patents

    Software is algorithms.<br>Algorithms is mathematics.
    Software ist mathematics? Jawohl!
    <br><br>Donald Knuth was right.<br>h-t-t-p://www.pluto.it/files/meeting1999/atti/no-patents/brevetti/docs/knuth_letter_en.html<br><br>God bless Google.
    Dietrich T. Schmitz, ~ Your Linux Advocate
    • RE: A closer look at the costs (and fine print) of H.264 licenses

      @Dietrich T. Schmitz, Your Linux Advocate
      I have two notebook computers, both dual boot - Win7 + PC Linux on one, Win7+ Puppy Linux on the other. Each OS has software for which a paid license is required. Yes, there can be licensing fees charged even if the OS is 'open source'. Remember that not all Linux users are IT tech's. Some Linux users want the advantages Linux offers, but lack the coding savvy and time required to make open source software meet their needs. They'll gladly pay a licensing fee for software that makes their life easier - even if the software is opensource-based. They are not 'paying' for open source software - they are paying for the time and talents of a developer that will free resources that can be better used elsewhere.
      nkfro
  • Eco argument, the cost of innefficient codecs

    Youtube serves about 750 billion video's per year.
    About 3000 billion minutes of video.
    VP8 videocodec is less efficient than h.264.

    Let's put the energy cost up for that say 0.05 Wh for the extra transport cost per minute of video and an extra 0.1 Wh for playing the video per minute*.
    That would just mean that a descision for Google to move all of youtbue to WebM with the VP8 codec would cost a staggering 450 billion Wh extra energy compared to using the h.264 codec.

    Not a very green choice by Google.


    * actually I measured more than a 6W increase for playing a quality WeBM trough html5 in Firefox compared to playing the same video h.264 trough IE9. h.264 is much less demanding if a computer supports hardware decoding.
    IE9
  • Naivet&Atilde;&copy;

    The MPEG-LA members are for profit enterprises, some of which have been pretty ruthless and even acted illegally in the past. If this whole codec business were not ultimately about the money, they could just open source it and be done with it. They would have no administrative costs.<br><br>This is about making money directly from IP or indirectly from controlling a market and sell related products. I just do not see any compelling reason to get involved unless you have to, your protestations that it is just "pocket change" notwithstanding.<br><br>Oh, and I have a bridge I could sell you. I could also sell you some crack for cheap for a while, with "reasonable" price increases, once you are hooked.
    Economister
    • RE: A closer look at the costs (and fine print) of H.264 licenses

      @Economister

      Google is a for profit enterprise. They have been pretty ruthless and even acted illegally in the past. If this whole search business were not ultimately about the money, they could just open source it and be done with it.

      I use search a heck of a lot more than I watch video on the web. As search is a fundamental component of the web they should open source their search algorithms. You know, for the betterment of the web.
      Rich Miles
  • Bottom line

    Unless you want to pay for Chrome, I think Google has every right to include or exclude anything it wants. It's free.

    Why should they have to pay, when we won't?
    Hameiri
    • What you're missing

      @Hameiri

      Google certainly does have a right to make a business decision about what it does or does not include with its browser. What it is also doing is making a technical decision to remove support for codecs that are already installed on the user's machine.
      Ed Bott
  • RE: A closer look at the costs (and fine print) of H.264 licenses

    It's about the money, as some here have pointed out. I don't care if H.264 is better or worse. Doesn't matter if H.264 has some limited hardware support. That hardware is not specific to H.264... it's just typical math acceleration hardware like a MAC, BSS and other DSP hardware that will be just as useful for MPG1/2 or MPG4 or H.583765885485784758457 (or whatever silly designation they come up with) CODECS. I can assure you there are better CODECs that can use that same DSP hardware, which CAN'T be "patented" as DSP is public domain and every GPU on Earth has it. Why has no such new CODEC come to light? You know the reason. FUD. "Does it have any patent encumberances?" That's what we'll be taking away from this nonsense. No need to litigate. Just sow some FUD and watch powerhouses like Google fold like a wet paper towel.
    RyuDarragh
  • Well done Sherlock Bott

    We ALWAYS knew is was about the stiffing that Google could get in 2016, they have done their business risk homework properly and are saying no thanks to the 2016 land mine.

    Microsoft and Apple are major members of the MPEG LA, and Microsoft are famous for conducting proxy attacks through third parties so do you blame Google for this move ?

    "Who pays for an H.264 license ?" - the plain truth is YOU the consumer, one way or another.
    Alan Smithie
  • RE: A closer look at the costs (and fine print) of H.264 licenses

    I'll admit total ignorance here, but if Windows and OS X already contains the H.264 code, why do any of the browsers need to embed it as well?
    bartly