Proposed MPEG-4 Licensing Draws Fire

Last week, proposed licensing terms for MPEG-4 Visual technology were publicly unveiled by the MPEG LA, which acts as an administrator for the many patent holders of MPEG-4 technology including Sony, Microsoft, Phillips, and other major communication and entertainment technology companies. Questions are already arising about the viability of MPEG-4 technology for use in PC-based streaming media under the proposed initial terms.

The proposed licensing terms cover Visual Simple and Core profiles, and do not address MPEG-4 Systems or MPEG-4 Audio. The terms include: the cost of distributing a decoder (player) will be 25 cents with a cap of $1 million per year, the cost of distributing an encoder will be identical to that for a decoder, and a serving fee of two-cents per hour for all content (whether streamed, downloaded, or packaged on DVD/CD/etc.) is uncapped. Also, the terms appear to forgive all past uses as well as the first year of fees to those who sign a licensing agreement.

The 25 cents per player download fee could limit MPEG-4 technology distribution in the PC-based streaming market, where Real, Apple, and Microsoft offer free players for download. Conversely, the cost of encoder distribution may not have much negative impact on PC streaming as encoders are typically used in much smaller volume and a cost is more common.

However, it is the two-cents per hour fee for serving or delivering video that especially concerns Tom Jacobs, the president of Internet Streaming Media Alliance (ISMA), which seeks to accelerate the adoption of open standards for streaming rich media over the Internet. Jacobs asserts, "In particular, the ISMA does not believe that the current content streaming royalty is practical, commercially appropriate, or enforceable."

Jacobs sees these terms as failing to recognize the realities of the Internet streaming media marketplace, and looks forward to a constructive dialog with the MPEG LA. "There are four members of the essential visual patent pool that are also members of the ISMA, and the ISMA as a larger organization will be happy to work closely with MPEG LA in developing terms that meet the licensors goals, as well as the industry goals we pursue."

There may be some kinds of non-commercial content that are not subject to this use fee. For example, if a company isn't charging for their content, they may not have to pay a fee -- depending on what the proposed licensing terms mean exactly. Rob Koenen, president of the MPEG-4 Industry Forum (M4IF) and chair of the MPEG requirements groups, observes, "What constitutes making money off content still needs to be clarified." This is partially because the final license is not available, just a summary of terms as provided by the MPEG LA.