Revenge of the Codecs Part 2 – The War for 4K Streaming Profits

One codec to rule them all…

For many years, the happy Hobbits of Netflixshire, and adjacent suburbs of Hulu, HBO, and Amazon, have been serving massive dollops of delicious HD content to all visitors. The cooks (content creators) and the Shire are paid handsomely, but the Halflings of Codec receive only a small delivery fee. 

However, darkness has shadowed Middle-Earth as all eye the rise of Profits, which are far more Precious than ever before. Large shires are breaking apart as the Apple-ings, Lords of the Mouse, Servants of the CBS Eye and others set up their own content Shires. Codec Halflings, seeing 4K as their last chance to enrich their coffers, are demanding increased tariffs on 4K streams, thus beginning the War of the 4K – One Codec to Rule Them All.

With apologies to J. R. R. Tolkien, this parable summarizes the state of consumer streaming. There are no Orcs – just companies pursuing competing profit goals.

Years ago, when Netflix was in its infancy, the MPEG 4/AVC H.264 codec was developed for HD video. The patent pool, MPEG LA, set up a clearly defined royalty process, costs and cap for annual usage, which amounts to pocket change for large-scale streaming suppliers like Netflix today. Even so, Chrome and Firefox browsers don’t support H.264 (or HEVC), saving costs and advancing Google’s own VP9/AV1 codecs.

When HEVC (Highly Efficient Video Codec) H.265 for 4K streaming was developed, everyone got greedy, and things got messy. Now there are three independent patent pools and many others not in a pool, all insisting on a piece of the profits. As a result, HEVC adoption has been problematic, as companies can’t predict usage and costs.

What’s even more confusing is that HEVC is really a temporary codec, to be replaced by VVC (Versatile Video Codec) H.266 in a year or so. Turns out HEVC isn’t as Highly Efficient as planned. VVC is designed to be 30-50% more efficient, and promises to provide a better patent process – though experts expect the same patent mess as HEVC.

The streaming giants, such as Netflix, Amazon, Facebook, Intel, Google, Apple, Microsoft and more, formed the Alliance for Open Media to create a new 4K codec based on Google’s VP9, called AV1. It’s royalty-free, and the Alliance has the resources to fight off claims from patent pools. There’s one set up already, but yeah, good luck with that. 

Consumers won’t sense the battle in the background – 4K will still look like 4K. The big winners will be the streaming vendors, as they can encode all the streams using one codec. Generally, Web videos are typically VP9/AV1, and device streaming tends to be HEVC. Not that people are watching much 4K anyhow – more than 90% of streaming content is HD H.264. That will change over time. It’s interesting that Samsung is developing AI-assisted 8K upscaling as they bring out more 8K TVs.  Looks like they expect content to be a mix of HD and 4K for the foreseeable future.

Who wins? Easy question, as anyone who recalls the Microsoft Explorer/Netscape Wars knows – free always wins.