H.265 / HEVC License Pricing Updated for Low Cost Devices

Most video codecs such as H.264, H265/HEVC, MPEG-2, MPEG-4… requires the manufacturer to pay a license fee. The fees are then added to the final product, but the actual codec fees are usually unknown to the end user. One of the exceptions are VC-1 and MPEG-2 license fees for Raspberry pi boards which are sold separately for respectively £1.20 ($1.58 US) and £2.40 ($3.16 US).

So I assumed that licenses pricing was mostly private and negotiated based on volume. But a recent article stated that HEVC Advance, independent licensing administrator, revised the royalties for lower-price devices (<$40) with the price table below providing a good insight into pricing for different device types, unit prices and regions.

Click to Enlarge

The new discounted royalty rate category applied to consumer and commercial products selling for less than $40 including set-top boxes, surveillance cameras, game console and others. A simplified Patent License Agreement (PPL) was also announced in order to reduce costs for licensees.

The table above requires some explanations:

  • Region 1/2 – Region 1 is comprised of countries with higher GPD per capita, and Region 2 are all other countries, mostly developing countries.
  • Advance Profiles Extension –  Additions to version 2 of HEVC specifications with RExt, MV-HEVC and SHVC (3 profiles).
  • Three main categories of devices for licenses:
    • Mobile Devices
    • Connected Home & Other Devices
    • 4K UHD+ TV

The license is apparently applied to the country of sale or manufacture, and “if there are no patents in both the country of manufacture and the country of sale, then no royalties are due for HEVC”. Those licenses appear to be for manufacturers, so I don’t know if silicon vendors pay a license too. I also don’t understand what happens to those TV boxes sold from China, and shipped to various countries around the world, how is the licensee fee calculated, if any? Comments are welcome.

The good news is that in case HEVC license fees are indeed paid in China, cheap devices with H.265 codec should become even cheaper with up to 85 cents less royalities to be paid per devices.

Thanks to Theguyuk for the tip.

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Jon Smirl
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It is not this simple, there are multiple patent pools claiming ownership of h.265. Licensing with this one does not settle things with the other pools. This multi-pool fighting is a core reason h.265 is going nowhere.

The overlapping demands can exceed $5 per device.

Wellwell
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Wellwell

Anyone Wonder why this is being done? Discounted royalties? Google “AV1” – The royalty free codec developed by the tech community.

Jerry
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Jerry

F*ck patents. 20 years of “protection” does not really work in the tech business.

Jon Smirl
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The h.265 royalty is charged at the time a brand is applied to the finished product. So when the brand Axis is applied to a webcam, they owe the h.265 royalty at that point (if they choose to enable it).

So you can make all of the chips you want that support h.265 without paying royalties. The royalties are designed this way on purpose. Make it royalty-free to spread the hardware, then stick it to the last person in the supply chain.

So first I suspect almost none of those TV boxes are bothering to pay royalties to anyone. There are people all over the map trying to collect royalties on codecs, HDMI connectors, SD card, cellular modems, etc, etc, etc. Some of these efforts are valid and some of them are dubious.

Second, h.265 is only worth paying a $5 royalty for devices that support 4K resolution. The gains at 1080P aren’t enough to justify the royalty payment.

Software is a special case. h.264 has a similar royalty mess but at much lower rates. But it is possible to fully buyout your h.264 royalties. Cisco has done that. Cisco then used their buyout to provide free h.264 codecs to places like Firefox. See the problem Firefox has? Firefox is free for anyone to download and copy. Before Cisco came along if Mozilla had supported h.264 they’d owe a $1 or so a copy in royalties. Where was that $1 going to come from? Firefox is free and has distributed a billion or so copies.

Now you know why Google created VP8/VP9 which are royalty free. Free, massively distributed software and royalties are simply incompatible. The is no Cisco providing free h.265 codecs, so very little software supports h.265. BTW, VP9 functions very similarly to h.265 minus the royalties. But there are always wrinkles. Google has not been as successful in lobbying hardware vendors to include VP9 support in their chips. Maybe this is because the h.265 lobbyists expect to collect billions from their efforts and the VP9 lobbyist will get nothing but their salary from Google.

So PC based software is shut out of h.265 since there is no source for free codecs. No PC based codec really reduces the demand for h.265. Of course, you can add h.265 support to PC software if you pay the royalty.

Keith Woodward
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That’s a very interesting insight Jon, thank you.

pug_ster
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pug_ster

@Jon Smirl

Do you think that is the reason why many android tv boxes are shipped from China? Skirt the licensing fees and having android tv boxes with kodi preloaded?

Jon Smirl
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Most Android TV boxes are built in China because all of the cheap SOCs used in those boxes come from China. China is a very low-cost place to build electronics. It does not make much sense to ship those Chinese SOCs to another country with higher manufacturing costs. Adding Kodi is a secondary effect. China would still be making these cheap STBs even if Kodi did not exist.

Big Chinese manufacturers pay the legitimate royalties. I can understand why the smaller companies don’t. It’s a complicated mess to figure out what you owe and it is simpler to just ignore it all. Plus there are a number of players with dubious claims trying to collect. A small Chinese company is not suited to sort out the real stuff from the bogus.

If a small company were to pick one license to put effort into I would recommend getting a Google Play license as the most important. And that license is free. Get that one first, then worry about the other ones.