Real: Licenses could kill MPEG-4

Reeling in new streaming technologies Rob Glaser, CEO, RealNetworks

"The licensing structure is putting the technology on a path to become irrelevant in the PC industry," Glaser said after giving a keynote speech at the Streaming Media West conference here.

His remarks address a fee structure put forth in early February by MPEG LA, a licensing body representing 18 patent holders of the technology. Still under consideration by the group, the plan would require licensees to pay 25 cents for each MPEG-4 product, such as an encoder or decoder, with fees capped at $1 million a year. The plan also suggests charging a per-minute use fee, equivalent to 2 cents for each hour encoded in the format, that includes content on DVDs.

Such fees would make it cost prohibitive for media players such as RealNetworks' RealOne or Apple Computer's QuickTime to support the emerging standard. Apple immediately rejected the proposed licensing terms, leaving the future of its QuickTime multimedia technology in limbo.

The licensing impasse over MPEG-4 could help Microsoft, which has refused to sign on to the standards effort. Even if acceptable terms are eventually hammered out, the delay will give Microsoft more time to push its proprietary Windows Media format.

MPEG-4 is the successor to MPEG-1 and MPEG-2, technologies behind digital broadcast transmissions over cable, satellite and the Internet. Like its predecessors, MPEG-4 comprises audio and video technologies that condense large digital files into smaller ones that can be easily transferred via the Web. It also adds such features as interactivity, e-commerce and digital rights management to audio and video files.

RealNetworks is pursuing a dual strategy, Glaser said, partly to offset uncertainty over MPEG-4's future in light of the licensing issue. The company's proprietary media player system, RealSystem, supports MPEG-1 and MPEG-2 as well as MPEG-4. Meanwhile, the company on Wednesday backed the new standard by launching a site that promotes interoperability between different codecs, or video and audio compression and decompression technology.

Larry Horn, vice president of licensing and business development at MPEG LA, said he disagrees with Glaser's assessment, saying "it's premature" since the group is still defining the licensing terms.

"Final terms of the license have not yet been developed, and we're working on them," Horn said. "The marketplace can see that the patent holders are working hard to address some of the concerns, and we will come up with a license that is acceptable to the marketplace and everything should work out just fine."

Horn said MPEG LA and patent holders met last week to discuss the concerns of prospective licensees as well as alternate royalty approaches. The group is considering, for instance, use-based payments that place royalties on products and services that receive remuneration, such as encoding MPEG-4 for DVDs. Horn said he expects a final licensing structure to be in place in a few months.

Some streaming media experts said there are few signs so far that MPEG LA feels pressured to drastically overhaul the proposed licensing structure.

"Given the fact that the media player companies bear the brunt of these licensing fees--they would have to pay the encoding and decoding fees--I wonder if MPEG LA is listening," said Derek Top, managing editor of Streaming Media Research.

News.com's Gwendolyn Mariano contributed to this report.