MPEG LA has announced plans to extend the duration of no-cost h264 licensing for free Internet video until 2016. This move lifts some of the immediate ambiguity about h264 licensing and will allow the codec to continue to gain broad traction on the Internet.

The patents that cover the various essential principles behind h264 video compression and streaming were obtained by a broad number of companies including Microsoft, Apple, LG, Sony, Samsung, and many other major players in the media and consumer electronics markets. These companies collaboratively pooled the patents through MPEG LA, an organization that sells patent licenses on behalf of its members. The pool makes it possible for users of the codec to obtain many of the requisite patent licenses from one place rather than having to go to each company individually.

This approach to patent licensing is very common and is often used in other technical fields, such as telecommunications, where implementors need to license an assortment of patents in order to adopt a specific technology. It's important to note, however, that there is no guarantee that every company with relevant patents is participating in the pool—meaning that licensees still have some exposure to the risk of infringing submarine patents.

The terms under which MPEG LA sells h264 licenses are relatively complex and highly nuanced. The cost will differ depending on the specific context in which the codec is being used. Different licenses are needed for distributing codec implementations and distributing h264 content. Those two categories include a spectrum of scenarios with different licensing terms. For example, the cost of distributing a codec differs depending on whether it is integrated into an operating system or shipped with a piece of software. For h264 content distribution, there are different licensing schemes for Internet streaming and broadcast television.

Although few users realize it, the codec implementations that are included in professional multimedia software often don't cover all possible uses. If you encode h264 media with Final Cut Pro and sell it on a physical medium, for example, you have to pay an additional license fee to MPEG LA.

A common practice among technology patent-holders is to offer cheaper or more permissive terms during an introductory period and then increase the costs later. Discounted introductory licensing lowers the initial barrier to adoption and helps to build a market for a technology so that the patents will be worth more later. When the codec was first introduced, MPEG LA did not require a licensing fee for the privilege of streaming free h264-encoded content over the Internet. These terms, which were to expire in 2010, made it feasible for streaming video Web sites like YouTube to adopt h264.

With the approach of the expiration date, a lot of questions were raised about the future of h264 licensing. The ambiguity was a major concern for many of the companies that used the codec for Internet video. They feared that MPEG LA would saddle Internet video with the same kind of costly licensing terms that the organization currently applies to television broadcasts—-$2,500 per transmission or $10,000 per year for every million households that can receive the broadcast.

MPEG LA's decision to extend the no-cost terms for free Internet video distribution will effectively defer this issue until 2016, the new expiration date. It's still unclear what the licensing terms will be after the new expiration date—MPEG LA could choose to apply hefty fees at that time. For now, however, the absence of licensing costs for Internet streaming will likely contribute to expanding the acceptance of h264 in the world of Web video.

The need for a competitive royalty-free codec

Although the immediate need for a royalty-free alternative to h264 is perhaps less urgent now, it does still exist. A royalty-free codec with competitive performance is essential to the success of standards-based open video.

New capabilities brought to the Web by HTML5 will make it possible for browsers to natively support video without having to depend on a proprietary plugin that is controlled by a single vendor. Unfortunately, the viability of the HTML5 Video element as a replacement for plugin-based streaming video solutions will largely be predicated on whether the browser vendors can agree on a codec.

A compelling royalty-free codec that meets the needs of all of the major stakeholders in the Web video ecosystem would be advantageous for HTML5 video. If there was an option that could be implemented uniformly in all browsers, it would make it easier for the browser vendors and content distributors to reach consensus. At the present time, HTML5 video implementations do not all consistently support the same codecs. Apple and Google favor h264 while Opera and Mozilla favor the royalty-free Ogg Theora codec.

Although Apple and Google would both likely welcome a viable royalty-free codec, they do not believe that Theora is capable of meeting their needs. Google is concerned about the adequacy of Theora compression for streaming video and Apple is concerned about the general lack of support for hardware-based Theora decoding. Mozilla is unwilling to commit to a proprietary codec that can't be freely redistributed to end users.

The fact that h264 codecs can't be distributed in open source software has implications for video consumers, but it also impacts producers. Beyond the need to supply an acceptable option for open Web standards, a competitive royalty-free codec would also be beneficial because it would prevent patent costs from disenfranchising independent media creators.

The development of open source video production and editing software is currently hindered by the patent encumbrances that prevent such applications from supporting proprietary codecs. Consumers who want to use free and open source software to produce video are locked out of the formats that are supported in practically everything else.

The path towards a royalty-free h264 alternative

Although Ogg Theora still has some technical limitations, it is advancing rapidly and could have the potential to become a competitive alternative to h264. It already fares better than many people realize in the context of Internet streaming video. In order to accelerate the development of Theora, Mozilla has contributed funding to Xiph.org, the group that is building and maintaining the codec.

Another possible contender is Dirac, a royalty-free video codec developed by the BBC that uses wavelet-based compression. The BBC has already successfully used the codec internally for transmission of HDTV content. A practical real-world implementation called Schrödinger is available and can be used today in several applications, including the VLC media player and software that uses the GStreamer framework.

There is also the possibility that Google could come to the rescue. The search giant recently made a deal to acquire On2, a company that is well known for developing sophisticated multimedia software. On2's VP8 codec reportedly offers better compression and performance than h264. There is considerable speculation that Google could potentially be planning to open up VP8 and make it available under royalty-free terms in order to accelerate the growth of standards-based Internet video.

Assuming that VP8 is as good as On2 claims, opening it up would make it a very compelling rival to h264. Google has not yet made clear what it intends to do with On2's intellectual property, so it's still too early to say whether VP8 will actually become royalty-free.

It's possible that at least one of these options will become viable by the time that the extended term of h264's no-cost Internet streaming license expires. One can hope that it will happen sooner rather than later, however, because the viability of standards-based video streaming and open source video editing really need a boost.