‍

As demand for video content continues to surge, patent owners are keen to grab their slice of the pie, but they will need to remember that video streaming is a unique industry and will require more custom, flexible solutions.

At IAM’s Patent Transactions event in San Diego on 10 September, Ericsson Senior Director of Licensing Thomas Choi, DivX CEO Noel Egnatios and Qualcomm Vice President of Strategy and Analysis Priscilla Srbu discussed their approaches to the streaming, in a panel moderated by Rodolfo Barreto, a partner at Licks Attorneys.

“It is important to understand the value that particular streamers are getting from the technology and the business model that they have,” says Choi. “Every streamer may have a different model so pushing a certain deal structure down someone’s throat doesn't tend to work very well. Flexibility is the path forward.”

‍

The royalty rate struggle

One of the big challenges has been creating a royalty model that works for most streaming services. With no device to base the royalty on, the industry has struggled to find a model that works with everyone.

“Per stream might work for some but then TikTok might complain that's not fair to them,” explains Choi. “With percentage of revenue, Google or YouTube might say it’s difficult for them to extract what the actual value of the stream is. Per subscriber might work for Netflix, but when someone is renting a movie online, it's difficult to tie that to a particular subscriber. What the industry is realising is that there's not a single royalty methodology that would be fair for all the streamers.”

Egnatios agrees, pointing to how many deals relate to lump sum payments, with changing rates over time and short-term agreements. “The streaming industry is changing so people don't want to be locked into a certain model,” she says.

Srbu recommends an adaptable approach: “There’s a lot of thought that goes into determining the licensing models and the royalty base, but you need to consider different options whether it's early-bird discounts, regional consideration or enterprise caps. Specifically with the latter, it's important to understand the market and make sure that enterprise caps aren't priced at a place where you've got the majority of your large-industry players getting the cap.”

‍

Don’t stick to one approach

Choi and Egnatios suggest that rather than sticking with bilateral licensing or a patent pool, a hybrid approach is more practical in the long run.

“One of the problems with the streaming space right now is that you have multiple pools so it's not like the auto industry where you have a one-stop solution,” says Choi. “There's potential confusion amongst the implementers, and as a result, you have multiple pool options and bilateral options.”

Major video codec patent holders like Nokia and InterDigital have engaged in bilateral licensing, while Avanci and Access Advance have launched patent pools.

Access Advance’s Video Distribution Patent Pool launched in January, hoping to license HEVC, VVC, AV1 and VP9 video codec portfolios to video streamers. The Access Advance pool has 33 licensors and four licensees. The Avanci Video programme launched in October 2023, offering a licence to five different video codec technologies: AV1, HEVC, VVC, MPEG-DASH and VP9. Ericsson is one of Avanci Video’s 39 licensors but the pool hasn’t announced any licensees yet.

“We want the technology to flourish; we want more adoption, but we also want a fair return for the technology that we have,” says Choi. “We're not going to rush into any deal, but we want to have the right return in order to incentivise the internal team to produce the next innovation within the space whether that’s H.267, H.268 and onwards.”

Of course, competing pools isn’t ideal. History isn’t flattering either: MPEG LA launched a pool targeting streamers in 2016 but ceased operations in 2019 (Via Licensing later acquired MPEG LA).

“It's a frustrating outcome because if people look to pools for certainty as a licensee and then you see two pools competing, that means you're stacking royalties,” points out Egnatios. “Then when a pool disappears, a streaming company will think ‘I guess it was a good idea I didn't take that licence and pay those people for four or five years’. This rewards holdout and that is a huge problem in the streaming industry. That's why there's so much litigation right now.”

‍

Looking ahead

Nonetheless, the future of video codecs looks promising for licensors with growing demand for video content and more refined technology to play it on.

“Video codecs are enabling technologies that have transformed the way people use their devices and the way we consume content,” says Srbu. “Applications that they've enabled include things like video capture, playback, user-generated content, social media and more. It drives the need for more advanced consumer devices – larger displays, more sophisticated camera technology, better audio.”

The streaming industry has nearly tripled in growth over the past five years, and the amount of video traffic is expected to triple as well, notes Srbu. “That means increasing video demands, more use cases and more value,” she predicts. “Where we are today and where we're headed, video codecs bring a significant amount of value to a number of industries.”

With that, the line between traditional video content and social media is rapidly blurring.

“Who is a content creator as a social media company or as a traditional media company?” asks Egnatios. “How should they be treated from a licensing perspective? Certainly, there has to be flexibility because a 30-second short is different from a long-form Lionsgate film, but all of those people are processing video and are, theoretically, in the ecosystem – so they should pay something. What that is, is anopen question, and that is where battle lines will be drawn.”