MPEG Business Model On Its Last Legs While AOM Shines


MPEG founder and chairman, Leonardo Chiariglione, states on his blog that the current business model for MPEG is broken, writing a post “A crisis, the causes and a solution” in response to the “rumours spreading about a presumed ‘MPEG-video collapse’”.

The International Standards Organization’s Motion Picture Expert Group (MPEG) was founded 30 years ago and has created 180 digital media standards across that time, including the MP3 for digital music (1992), MPEG-4 Visual for video on internet (1998) and DASH for internet streaming (2013). Patent holders receive royalties, which allow them to continue investing in new technologies. Chiariglione describes this as “a virtuous cycle everybody benefits from”.

As increasing numbers of proprietary and royalty free digital products have emerged over recent years, they have negatively impacted upon the MPEG business model. Chiariglione says that the biggest threat to the MPEG business model is The Alliance for Open Media (AOM).

AOM was only founded in 2015 to develop next-generation media formats, codecs and technologies and “address marketplace demand for an open standard for video compression and delivery over the web.” However, its founding members carry a huge weight, involving a large number of leading Internet companies (from Amazon to Facebook to Google), and they have been moving quickly to pursue their goals.

Chiariglione argues that the MPEG model is now in crisis because of AOM’s forthcoming open, royalty-free AV1 video format, which claims to perform better than MPEG’s modern standard (HVEC). He states that now “everybody realises that the old MPEG business model is now broke, all the investments (collectively hundreds of millions USD) made by the industry for the new video codec will go up in smoke and AOM’s royalty free model will spread to other business segments as well.”

The MPEG founder states he “saw the threat coming” and tried to alert the higher layers in ISO, but his attempts were “thwarted by a handful of NPEs”. He does outline a potential solution, but counterintuitively laments, “I personally doubt that something will be done, though, seeing how blindfolded the industry is”.

Nonetheless, Chiariglione outlines two actions. The first action involves the introduction of ‘fractional options’. ISO would envisage two forms of licensing: Option 1 – royalty free, and Option 2 – FRAND, which means with undetermined licence. “We could introduce fractional options in the sense that proposers could indicate that their technologies be assigned to specifically identified profiles with an “industry licence” (defined outside MPEG) that does not contain monetary values” he writes. Option 1 could be “no charge” and Option 2 could be targeted to the OTT market, etc.

The second action, complementary to the first rather than an alternative, is to streamline the current MPEG standard development process. He writes, “Within this a first goal is to develop coding tools with “clear ownership”, unlike today’s tools which are often the result of contributions with possibly very different weights. A second goal is not to define profiles in MPEG. A third goal could be to embed in the standard the capability to switch coding tools on and off.”

Chiariglione concludes his latest post by asking if this is the end of the world as know it. He states his belief in the ability of AOM to “give much needed stability to the video codec market”, but he says, “this will come at the cost of reduced if not entirely halted technical progress”. He believes that without MPEG’s royalties’ structure, there won’t be the same incentive for companies to develop next-generation video compression technologies and this will lead to large-scale job losses in the sector, and a huge reduction in private and university investment in video compression technology. He concludes, “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.”

Cory Doctorow on hit back at this charge, stating that Chiariglione is ignoring the history of other open formats and systems, which are often improvements over their proprietary counterparts. Doctorow argues that the first reason for this is, “companies that use the standard can pay to improve it to suit their needs, rather than paying rent to a patent-holder”, which ultimately benefits everyone; and secondly, “companies that use video are often in the video-using business, not the patent-rent-seeking business… It doesn’t really matter to their bottom lines if they’re spending $X/year in rent to patent-owners, or $X a year in grants to universities or funds for their own R&D to improve the standard.”

Nonetheless, one thing all can agree upon is that the video compression and digital media landscape is rapidly changing, and MPEG is the likely victim of the huge rise in open source, royalty free digital products, spearheaded by AOM.

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