for H.264 will be broadcast-quality streamed or stored video, replacing existing technology in ‘higher-end’ applications such as broadcast television or video storage.

8.5 COMMERCIAL ISSUES

For a developer of a video communication product, there are a number of important commercial issues that must be taken into account in addition to the technical features and performance issues discussed in Chapters 5, 6 and 7.

There are however some factors that work against this apparent openness. Companies or organisations within the Experts Groups have the potential to influence the standardisation process and (in the case of MPEG) have privileged access to documents (such as draft versions of new standards) that may give them a significant market lead. The standards are not easily approachable by non-experts and this makes for a steep learning curve for newcomers to the field. Finally, there are tens of thousands of patents related to image and video coding and it is not considered possible to implement one of the more recent standards without potentially infringing patent rights. In the case of MPEG-4 Visual (and probably the Main and Extended Profiles of H.264), this means that any commercial implementation of the standard is subject to license fee payments (see below).

8.5.2 Licensing MPEG-4 Visual and H.264

Any implementation of MPEG-4 Visual will fall into the scope of a number of ‘essential’ patents. Licensing the rights to the main patents is coordinated by MPEG LA [1], a body that represents the interests of the major patent holders and is not part of MPEG or the ISO/IEC. Commercial implementation or usage of MPEG-4 Visual is subject to royalty payments (through MPEG LA) to 20 organisations that hold these patents. Royalty payments are charged depending on the nature of use and according to the number of encoders, decoders, subscribers and/or playbacks of coded video. Critics of the licensing scheme claim that the cost may inhibit the take-up of MPEG-4 by industry but supporters claim that it helpfully clarifies the complex intellectual property situation and ensures that there are no ‘hidden costs’ to implementers.

H.264/MPEG-4 Part 10 is also subject to a number of essential patents. However, in order to make the new standard as accessible as possible, the JVT has attempted to make the Baseline Profile (see Chapter 6) ‘royalty free’. During the standardisation process, holders of key patents were encouraged to notify JVT of their patent claims and to state whether they would permit a royalty free license to the patent(s). These patent statements have been taken into account during the development of the Profiles with the aim of keeping the Baseline free of royalty payments. As this process is voluntary and relies on the correct identification of all relevant patents prior to standardisation, it is not yet clear whether the goal of a royalty-free Profile will be realised but initial indications are positive1. Implementation or use of the Main and Extended Profiles (see Chapter 6) is likely to be subject to royalty payments to patent holders.

8.5.3 Capturing the Market

Defining a technology in an International Standard does not guarantee that it will be a commercial success in the marketplace. The original target application of MPEG-1, the video CD, was not a success, although the standard is still widely used for storage of coded video in PC-based applications and on web sites. MPEG-2 is clearly a worldwide success in its applications to digital television broadcasting and DVD-Video storage. The first version of MPEG-4 Visual was published in 1999 but it is still not clear whether it will become a market leading technology for video coding. The slow process of agreeing licensing terms (not

1 In March 2003, 31 companies involved in the H.264 development process and/or holding essential patents confirmed their support for a royalty-free Baseline Profile.