HEVC Advance Reduces Proposed License Fees

By Tom Vaughan

The patent licensing organization known as HEVC Advance has announced a revision to the royalty rates they propose to charge companies who sell hardware, software and content that utilizes the HEVC standard.

Our opinion:  While these rates are a good step in the right direction, they are still many times higher than what licensees paid for H.264 for the past decade, and they would have to be paid in addition to the  MPEG-LA HEVC license fees (20 cents per unit after the first 100,000 units in each year with a $25 million annual cap, no content royalties).  We are optimistic that large licensees including Intel, Samsung, Apple, Microsoft, Google, movie studios and all of the many TV, mobile and PC device OEMs will convince the companies involved with HEVC Advance to join the MPEG-LA licensees, enabling licensing at reasonable rates from a single license pool.

Royalty rates for 4K TVs are now proposed to be $1.20 per unit, plus up to 75 cents per unit if HEVC profile extensions are supported.  PCs and set-top boxes would be liable for 80 cents per unit, and mobile devices would cost 40 cents per unit.  Companies such as Apple and Amazon which offer both mobile and connected home devices would be liable for up to $40 million in device royalties per year, in addition to their MPEG-LA HEVC license which will cost up to $25 million per year.

Whereas they had previously announced that all companies distributing HEVC content would have to pay a royalty of 0.5% of their top-line revenue attributable to HEVC, without any annual cap, they have revised their proposed content royalty to charge only for subscription-based services and for content for sale on a per-title basis (including streaming content and physical media, such as Blu-ray discs).  Content fees will start at 0.5 cents per subscriber per month, rising to 2.5 cents per subscriber per month in 2020.  Per-title fees are 2.5 cents.  In either category, there is a $2.5 million annual royalty cap, with a $5 million cap for companies who distribute content through all three content categories.  Services that do not charge for content, including ad-supported services such as YouTube and Facebook would not be charged an HEVC content royalty.