[M4IF Discuss] Analysis: The next MPEG step

[Craig Birkmaier]

http://www.e-insite.net/eb-mag/index.asp?layout=article&stt=000&articleid=CA241180&pubdate=9/1/2002
The next MPEG step
Chip makers are gearing up for a new video standard, but will the 
market be there?
By Dean Takahashi, illustration by David Cutler -- Electronic 
Business, 9/1/2024
The last time that film experts released a new video compression 
technology, in the early 1990s, they fueled an economic boom for chip 
makers.
Tens of millions of chips that were compatible with the MPEG-2 
(Motion Pictures Experts Group) video standard were used in satellite 
TV decoders, DVD players and digital cable TV set-top boxes. Now chip 
makers are rushing to embrace a new video standard, MPEG-4, which 
promises even better compression. But this time the transition may 
not yield the same business boom.
Those who believe the hype about MPEG-4 say that, just as MPEG-2 
enabled satellite TV and DVD, MPEG-4 will lead to video on cell 
phones, video on demand on cable TV, richer DVDs that can store an 
entire movie collection on a single disk and better digital TV. With 
a single video standard used across so many devices, video content 
authors can look beyond the traditional markets and get revenues from 
having their movies run on cell phones or other portable devices.
"The goal for standards such as MPEG-4 is to offer everyone the hope 
of capturing video any time, any place, with the expectation that 
content can be exchanged or displayed whatever the device," says Avi 
Katz, CEO of Equator Technologies Inc., a Campbell, CA, maker of 
programmable media processors that can run MPEG-4 video.
One MPEG-4 optimist is Rob Koenen, president of the MPEG-4 Industry 
Forum, a broad industry coalition promoting the standard. Because 
MPEG-4's compression enables video to transfer in a shorter time, it 
reduces bandwidth costs. Cell-phone network operators can benefit 
from it because their data rates are barely fast enough to support 
video streams and cable TV providers can use the better compression 
to squeeze more channels through the same cables.
In addition to better compression, MPEG-4 images are more 
interactive, able to blend in graphics and other interactive elements 
such as active menu buttons into video, notes Koenen. For instance, 
splicing your head onto Obi-Wan's body in Star Wars: Episode One is 
relatively painless, technologically speaking, with MPEG-4 video. And 
MPEG-4 transmits equally well over phone lines, broadcast, cable or 
wireless, with data rates ranging from 5 kilobits a second to 50 
megabits a second. As such, it can display a small video on a cell 
phone or a rich image on a digital TV.
But there are obstacles aplenty. One has been a conflict over MPEG-4 
licensing. MPEG-4 was created in 1998 and ratified as an 
international standard in 1999. But the group of 26 MPEG-4 patent- 
holders took until early this year to hammer out a licensing 
scheme-which was then rejected by the potential licensees. Although a 
compromise was worked out in July (see Web Exclusive, "Pegging 
MPEG-4's price "), at least some observers still are skeptical. 
Companies may agree in principle today, but "when [the market] takes 
off, you'll see people start questioning this model again," says Jay 
Srivatsa, principal analyst at iSuppli Corp., a market research 
company in El Segundo, CA.
Moreover, MPEG-4 has plenty of competition. Not only is MPEG-2 
surviving in many applications such as digital cable TV, there are 
rival video compression technologies. Real Networks Inc., Seattle, 
and Microsoft Corp., Redmond, WA, are supporting their own 
proprietary compression schemes in software. Real Networks in April 
released its Real 9 video player. And Microsoft is preparing a new 
version of its Windows Media Player. Microsoft says Windows Media 9 
is 20% faster than Microsoft's current technology (no comparisons to 
MPEG-4 video are available yet) and it will come with integrated 
digital rights management technology that Hollywood movie studios 
have been pushing (see "Hollywood calls the shots ").
In fact, the PC market will be dominated by software video 
compression, according to Srivatsa, so there's not much of a market 
for MPEG-4 chips there. That means the biggest opportunity is in 
streaming video on cell phones and personal digital assistants, he 
says. And there's no killer application yet. No one knows if 
consumers will be willing to dish out money for high-end services 
like video on cell phones.
Indeed, the market for standalone MPEG-4 chips is small. By 2006, it 
should hit only $100 million, or 10 million units, which would be a 
mere 3% of the overall video chip market, according to Michelle 
Abraham, an analyst for In-Stat/MDR, a market researcher in 
Scottsdale, AZ, that is owned by ELECTRONIC BUSINESS parent company, 
Reed Business Information. Meanwhile, the entire video chip market is 
expected to triple in revenue from $1 billion in 2001 to $3.3 billion 
in 2006, says In-Stat/MDR.
Where's the driver?
In 1994, the market for video chips exploded because systems 
companies had to buy dedicated MPEG-2 decoders for their satellite TV 
boxes and other products. These were compelling applications that 
required standalone MPEG-2 chips. Today, not only is there no strong 
driver for MPEG-4, but also Moore's Law has delivered so much silicon 
real estate that it's almost a trivial matter to add support for 
MPEG-4 to any existing chip. Dallas-based Texas Instruments Inc., for 
instance, has built support for MPEG-4 into its high-end family of 
digital signal processors (DSPs).
"The era of the standalone MPEG-4 device is limited because you can 
put so much more on a chip," says Richard Templeton, chief operating 
officer of TI. "There will be some applications (like cell phones) 
where you can run it on a purely programmable DSP, and you'll also 
find MPEG-4 dedicated silicon. But you have got to have MPEG-4 in 
your arsenal."
Because of these barriers, chip makers must use the right strategy in 
embracing MPEG-4. Demand could take off so slowly that only start-ups 
may be happy with the number of unit sales. Larger companies may do 
better to include MPEG-4 in their design libraries, but only invest 
heavily when the demand materializes.
Nevertheless, dozens of chip makers have signed up to provide native 
support for MPEG-4 in their video chips, programmable DSPs and 
microprocessors. The market for all video chips is dominated by ESS 
Technology Inc., Fremont, CA, (which has a 31% market share thanks 
mainly to its video CD chips sold mostly in China), 
STMicroelectronics NV, Geneva, (23%) and LSI Logic Inc., Milpitas, 
CA, (23%), according to In-Stat/MDR. Then there are smaller companies 
like Sigma Designs, MediaQ, Tensilica, Neomagic, Equator Technologies 
and Trimedia. Other companies, like iVast Inc., Santa Clara, CA, are 
supplying MPEG-4 intellectual property to chip and systems companies 
like Philips Electronics NV, Eindhoven, Netherlands. In June, 
Conexant Systems Inc., Newport Beach, CA, agreed to buy the video 
compression business from GlobespanVirata Inc., Redbank, NJ, for 
about $25 million in cash and stock.
Toshiba Corp. and Matshushita Electric Industrial Co. Ltd., both of 
Tokyo, Japan, are already supplying chips for Japanese cell phones 
that are connected to the broadband wireless network of NTT DoCoMo 
Inc., Tokyo. So far, those phones are off to a slower-than-expected 
start, raising the question of whether people really want to watch 
movies on their cell phones. Sigma Designs, Milpitas, CA, launched an 
MPEG-4 decoder for set-top boxes in November and followed up in June 
with a decoder for DVD players. German broadband operator HanseNet, 
which has 20,000 DSL subscribers in the city of Hamburg, is deploying 
boxes with a Sigma Designs decoder chip to offer video-on-demand 
services.
Does one size fit all?
Part of each company's strategy must be to decide whether to use a 
programmable processor or a dedicated MPEG-4 chip. Some companies are 
going the programmable route, noting that video specifications are 
constantly in flux. For instance, neither Microsoft nor Real Networks 
are slowing down enough to freeze their compression specs into a 
standard. The MPEG-4 standard is set, but because it does not limit 
quality to specific levels, those who implement it can continuously 
improve the quality of image playback. Chip makers are being asked to 
support all three standards in their chips, as well as MPEG-2. As a 
result, systems companies may turn to programmable chips from 
companies like Equator Technologies, whose media processor has a very 
fast core engine that can be programmed to run different media types.
"The goal for standards such as MPEG-4 is to offer everyone the hope 
of capturing video any time, any place, with the expectation that 
content can be exchanged or displayed, whatever the device."
-Avi Katz, CEO, Equator Technologies Inc.
"When the standards are in flux, our flexible solution is much 
better," says Equator's Katz. LSI Logic's programmable Domino chips 
will be upgraded easily with software to handle MPEG-4, adds Bob 
Saffari, a product marketing manager at LSI.
But Sigma Designs is betting that there will be a good market for 
dedicated silicon. The company is making MPEG-4 chips for cable TV 
set-top boxes, particularly those that will run high-definition TV. 
The MPEG-4 specification is four inches thick with plenty of room for 
implementation differences, depending on the application in mind or 
the degree of interactivity, notes Ken Lowe, vice president of 
business development at Sigma.
There are in fact 19 or so flavors of MPEG-4, known as profiles, and 
implementing them all in silicon, particularly programmable 
solutions, isn't all that easy. That's why Lowe believes that the 
market will divide into two parts: low-end video on cell phones that 
can be handled by programmable microprocessors or DSPs, and a 
high-end market for set-top boxes, DVD players and digital TV sets 
that will require more complicated standalone MPEG-4 chipsets. Some 
chips will merely support simple versions of the MPEG-4 profiles, 
like those that merely play back video, rather than enable 
interactivity. The more profiles supported, the more sophisticated 
the silicon has to be.
The high-end chips will be taxed even more heavily if they are called 
upon to support Windows Media and Real Networks video in addition to 
MPEG-4, Lowe says.
On top of that, Lowe believes that encoding tasks-in which video 
images are compressed so that they can be transmitted 
efficiently-will be more complex and may also require more dedicated 
silicon, largely because they require a more complicated processing 
task known as motion estimation. Some chips, such as all-digital 
satellite TV chips, won't need to encode. But analog cable TV chips 
must both encode and decode video images.
"If people want better compression, higher quality and interactivity 
all at the same time, we believe that requires dedicated silicon," 
says Lowe.
A mixed approach
Other companies are offering hybrid solutions for MPEG-4 processing. 
Tensilica, Santa Clara, CA, a maker of configurable microprocessors, 
contends that video processing for cell phones isn't a trivial task 
and that's why some of its customers have created custom 
microprocessors that combine the features of a programmable 
microprocessor with customized instructions that handle specific 
tasks like motion estimation. With those instructions hardwired into 
the chip, the programmable Tensilica chip can hit better performance 
levels, the company maintains.
"If you use a microprocessor, it's important to offload some of the 
computationally intensive tasks to specific instructions," says Leo 
Petropoulos, director of applications at Tensilica. "You get the best 
of both worlds, better performance with the custom instructions and 
flexibility from the processor."
Neomagic, Santa Clara, which once made laptop graphics chips and now 
has refocused on the embedded chip market, is designing a MIPS-based 
microprocessor that will have built-in support for multimedia such as 
MPEG-4. The company is aiming the chip at handheld devices that will 
run games or video, play music or take digital pictures.
"If people want better compression, higher quality and interactivity 
all at the same time, we believe that requires dedicated silicon."
-Ken Lowe, vice president of business development, Sigma Designs Inc.
"The adolescent market might go for a device where you can watch 
Britney Spears dance and listen to her song at the same time," says 
Mark Singer, vice president of marketing at Neomagic. "Or maybe you 
can have a personal karaoke player."
And it isn't necessarily true that cell-phone chips that transfer 
video at low-bit rates won't require much processing power, says 
Singer. Rather, because of the difficulty of transferring 
high-quality video at low bit rates, the cell-phone processor may 
have to have a lot of horsepower, without consuming too much power.
"It takes a lot of horsepower and how you go about it depends on your 
strategy," he says. "It's our intention to do better with multimedia, 
whether it is compression or playback. And compression is usually 10 
times harder."
For any consumer device, it's important that chip makers tailor their 
chips so that they run MPEG-4 video faster and more efficiently than 
pure software. Chip makers who optimize for MPEG-4, Real Networks or 
Windows Media content can make the hardware run the video faster and 
consume less memory. That allows the devices to display high quality 
and yet consume less battery power and be smaller, says Kent Libbey, 
a vice president at iVast.
But how much of a market these chips ultimately find is still a big 
question. The standard has been out since 1999, "and there's still 
really no traction yet," notes Srivatsa. While vendors hope for 
MPEG-4 applications on cell phones, "we can't even keep cell phones 
from dropping [voice] calls," quips Srivatsa, emphasizing that 
watching streaming video on a cell phone might be quite a stretch. As 
for set-top boxes, there is an installed base of tens of millions of 
cable boxes in homes today that aren't MPEG-4 compliant. Consumers 
with those machines would have to be convinced to trade up to a 
better box with the newest MPEG-4 chips. That could take time, says 
Carl Rosendahl, managing director at Mobius Venture Capital, Mountain 
View, CA. Case in point: AT&T has backed off on the aggressive 
deployment of next-generation set-tops.
"It's tough to justify the economics of putting more boxes into 
homes," Rosendahl says.
That's why some of the chip makers and their equipment allies are 
going after other customers, such as phone companies overseas. For 
years, phone companies have wanted to use ordinary phone lines with 
digital subscriber line (DSL) technology to feed video into homes and 
compete with cable TV. Those plans have been dealt setbacks by the 
telecom collapse and the slower than expected rollout of DSL. But the 
potential is still there, because phone companies don't have to worry 
about upgrading existing set-top boxes and could use MPEG-4's better 
compression to offer more video choices.
"They've slowed down in the United States, but overseas in markets 
like Italy, they're being more aggressive," says Abraham at 
In-Stat/MDR.
Dean Takahashi is a freelance writer. He can be reached via e-mail at 
dean.takahashi   hotmail.com.
SIDEBAR:
Pegging MPEG-4's price
By Dean Takahashi -- Electronic Business, 9/1/2024
The MPEG-4 video standard has been the subject of a nasty licensing 
dispute that shows how hard it is to get an entire industry moving in 
the same direction.
The industry finally worked out a deal in mid-July, but the slow pace 
of establishing a mutually acceptable licensing agreement was 
frustrating because the industry had successfully licensed video 
standards before.
The prior video standard, MPEG-2, has been licensed since 1993. So 
far, 19 companies have licensed more than 400 patents to the MPEG-2 
licensing authority, which collects royalties of $2.50 for each 
MPEG-2 product created. Under antitrust law, it's legal for the 
companies to pool their licensing efforts, as long as they do so in a 
fair and nondiscriminatory fashion.
With MPEG-4, 26 companies banded together in the MPEG Licensing 
Authority consortium. They are licensing more than 50 patents as a 
group to chip makers, system makers and video player software makers. 
Terms for the audio portion of the standard were accepted, but when 
the licensing authority issued its proposed royalty scheme for the 
video standard in January the licensees revolted.
The licensees felt that the terms were too onerous because they not 
only included 25-cent-per-product fees but also usage fees for every 
MPEG-4 video stream that was downloaded or encoded with their 
products, says Rob Koenen, president of the MPEG-4 Industry Forum, a 
group that includes licensees such as chip makers, systems makers and 
makers of video players. Moreover, "tracking the usage was a 
difficult accounting requirement as well for most companies," says 
Koenen.
Under a compromise announced in July, chip and systems makers whose 
devices include MPEG-4 encoders and decoders will pay a royalty of 25 
cents per device. But the fees are capped at $1 million a year for 
encoders and $1 million for decoders, and there is no royalty charge 
for the first 50,000.
Those who offer video services to subscribers, such as Web sites that 
offer streaming video, will pay 25 cents per subscriber or 0.000333 
cents per minute of video viewed, subject to a cap of $1 million per 
year. Likewise, there is no royalty for the first 50,000 subscribers. 
Those who don't want to track usage can just pay $1 million in 
royalties per year. Makers of DVDs or other packaged movies would pay 
up to 4 cents a movie, depending on length of the film.
At least some analysts are skeptical that this model will work. The 
companies may agree in theory today, but when and if MPEG-4 takes 
off, they are likely to bristle at a licensing model that charges 
based on consumer usage, says Jay Srivatsa, principle analyst at 
iSuppli Corp. "I suspect this issue is not going to go away," he 
says. Meanwhile, On2 Technologies Inc., a video player maker in New 
York City that supports its own video compression scheme, complained 
to the Department of Justice and a number of state attorneys general 
that the MPEG Licensing Authority might be anti-competitive, largely 
because it allows its members to cut cross-licensing deals with each 
other, but outside companies must negotiate only with the licensing 
authority as a whole, says Doug McIntyre, CEO of On2. So far, 
McIntyre is waiting for reactions from the regulators before taking 
any further action, he says.