The launch of AV1 last week was an important development for the codec world. Unlike other codecs before it, AV1 has got more headlines about its business model than its potential performances. Why? Well, partly because of the failures of its royalty-bearing older cousin (see below), partly because it taps into the age-old question on who should pay for technology development.
Let’s start from a reality-check: AV1 will NOT be royalty-free. Despite what is said about it, it is unlikely that AV1 will be immune from third-party patent rights. And this is known to AoM, to the point that “[…] AOMedia, backed by leading members like Microsoft and Google, are ready to provide high-powered legal support and a defense fund to members of AOMedia shipping AV1 products”. (see https://www.eetimes.com/document.asp?doc_id=1333129). Interestingly, Velos Media, one of the HEVC patent pool, said in a statement that "We believe that it would be unwise for people to assume that AV1 will be royalty free […] We know that VP9 incorporates patented technologies of patent holders that are not part of AOMedia, including some of the patents being licensed by Velos Media for HEVC.” (see https://www.cnet.com/news/netflix-youtube-streaming-video-is-about-to-get-a-lot-faster-av1-compression/)
One of the failures of HEVC has been to allow detractors of royalty-bearing business models to attack those models using as a catalyst the confusion created by an uncontrolled patent pool scene in an industry that was used to a single patent pool. Incidentally, other industries are used to non-transparent fragmented royalty-based scenes – just think at the telecom industry - and yet no one has blamed that for delaying technology adoption.
My prediction? There is the potential of a massive patent war brewing on the horizon, with AV1 v HEVC being the likely battle ground - especially if AV1 really takes hold at the expenses of HEVC. And the irony is that this will NOT be about the codec, but rather about the challenge that a royalty-free model brings to royalty-bearing models. If the idea that “royalty-free is the new golden standard” takes hold, royalty-bearing models would be severely impaired, and they can’t simply go down without a fight.
Ultimately, developing a codec is a costly effort. Look at AV1 itself. It took almost three years and the joint effort of many multi-billion global tech and media giants to come up with a first specification and a non-optimised reference software.
The issue is not royalties. The issue is how we incentivise innovation, in particular from smallish players. To this extent, Leonardo Chiariglione in his blog made a good point when he said “There will simply be no incentive for companies to develop new video compression technologies, at very significant cost because of the sophistication of the field, knowing that their assets will be thankfully – and nothing more – accepted and used by AOM in their video codecs. Companies will slash their video compression technology investments, thousands of jobs will go and millions of USD of funding to universities will be cut. A successful “access technology at no cost” model will spread to other fields. So don’t expect that in the future you will see the progress in video compression technology that we have seen in the past 30 years” (see http://blog.chiariglione.org/a-crisis-the-causes-and-a-solution/).
It’s interesting to see the reply from AoM “[…] that's a very narrow view that reflects the history, the past, of how monetization happened with these core technologies […] Today profits -- and thus investments -- come from higher-level services. Think ads on YouTube and Facebook or subscription payments for Netflix, Xbox Live and Amazon Prime.” (again, see https://www.cnet.com/news/netflix-youtube-streaming-video-is-about-to-get-a-lot-faster-av1-compression/).
That money flows from higher-level services to technology development is true and has always been true. But the question is not where the money comes from, but what it will be used for. Are we sure that pushing the idea that a codec is just a commodity to be used to build services on top would not backfire? Are we sure that if only multi-billion service companies - who don’t need to care about making a return from the technology itself - are able to invest for developing a codec then we’ll all be better off, including those service companies themselves?
In the same way that excessive royalty demands coupled with abuse of the patent system has caused mistrust in perfectly legitimate royalty-bearing business models, by the same token promoting a royalty-free approach as the solution to all problems is misleading and will likely result in delay of major innovation breakthroughs.
Nobody will benefit from undermining one or the other business model. And the question remains: ultimately, who will be paying for new technology?