[M4IF Discuss] hourly usage fee for MPEG4

[Craig Birkmaier]

At 5:22 PM -0800 2/21/02, Rob Koenen wrote:
>Right now, and in this discussion thread, there are two basic questions at
>stake:
>1) Given the extra possibilities (say, over MPEG-2), is the cost of the
>MPEG-4
>    license reasonable?  (Ben's point)

Not certain if Ben's comments were interpreted correctly, as I marked 
his message for follow-up. But I agree with the way Rob has broken it 
down here.
When looking at migration from MPEG-2 to MPEG-4, as might be the case 
for Echostar if the merger goes through, the analysis is slightly 
different than the second scenario. You can do nothing, continuing to 
leverage your investment in MPEG-2.
The issues become the cost of replacing the existing infrastructure 
versus the benefits realized via that conversion. Clearly, the usage 
fee (if it is applied to DBS and other broadcast infrastructures) is 
a show stopper. MPEG-2 wins hands down as the incremental revenues 
will largely be consumed by the royalties.
And it is worth considering that if the merger fails, there may be a 
greater incentive to move to a more efficient codec, as they will 
continue to face severe bandwidth constraints.
>2) Does the cost allow solutions to be deployed that are competitive with
>    alternative -proprietary- technologies that may also provide these
>    extra possibilities? (Ken's point)

This is the point that I wanted to respond to Ben about. The more 
appropriate comparison is between the cost/benefits of MPEG-4 versus 
alternatives that provide similar levels of coding efficiency. As Rob 
points out, nothing is free, but large companies like Microsoft may 
make the decision to do some "cost shifting" for competitive reasons. 
Or any company may simply create a licensing structure that is more 
cost effective than what MPEG-4 is offering.
And there is the very real possibility that someone can develop a new 
codec technology that avoids infringement on the the essential MPEG-2 
patents, and thus avoid paying the "MPEG-2 tax."
>For MPEG-4 to succeed in any given market, both Ben's and Ken's questions
>need
>a 'yes' answer for that market.

Absolutely agreed!
>
>The challenge is making the license terms such that they are reasonable in
>*all* markets. The challenge is further that there are proprietary
>solutions,
>that may not always be as complete as MPEG-4, but do certainly provide
>solutions
>in specific situations and markets.

Again, Rob is right on the mark.
MPEG-4 faces many deployment challenges. It does not represent an 
"in-kind" replacement for existing audio and video compression 
technologies. The tactic of offering ONLY the visual license first is 
an intentional distraction, aimed at forcing implementors to make 
direct comparisons with MPEG-2 (per #1 above). MPEG-4 represents a 
completely different philosophy about the delivery of digital media 
content, opening the door to a wide range of new business models that 
may change the way digital media is consumed.  These possibilities 
include:
1. Localization of media and optimization for different viewing environments.
2. Personalization of media and user directed navigation and interaction.
3. Useful tools for scalability across devices with a wide range of 
performance and display capabilities.
4. Major improvements in compression efficiency based on the object 
coding and composition model.
Such a fundamental shift in philosophy invites another avenue of 
analysis. You must now consider the total costs of implementation for 
the entire standard and the infrastructure to support it. And you 
must consider the start up costs versus future revenue streams that 
this shift enables. Bottom line, it will require considerable upfront 
investment to bring about the fundamental shifts that MPEG-4 embodies.
This has been understood by the companies behind Real Player, Media 
Player, and QuickTime, and by the companies that have driven the 
Internet revolution in general. The ability to rapidly proliferate a 
new technology via royalty free components lies at the very heart of 
this revolution. The payoff comes from the growth of new industries.
Unfortunatley we are being held hostage by those who seek to block, 
delay and eventually control this new medium.
The reasonable compromise would be to create fair and reasonable 
licensing terms for the entire MPEG-4 standard, with a moratorium on 
imposition of these fees so that the technology can become 
established. The payback from this approach would be much greater, 
assuming that there is agreement on fair and reasonable terms, and 
the triggers (either time or installed base)  to end the moratorium.
The concept of a moratorium is already in play...the term is simply 
too short to be meaningful.
Another approach would be to collect the per unit encoder/decoder 
royalties as proposed, and to use the funds collected to promote the 
MPEG-4 standard until it is established. Perhaps some form of 
partnership between MPEG-LA and M4IF?
-- 
Regards
Craig Birkmaier
Pcube Labs