In order to deliver 4K content via streaming, broadcast or physical discs a modern compression format is required. The successor to MPEG4 is HEVC, but earlier this year industry players had to stop and consider its plans for using HEVC because licensing costs exploded. A new deal makes it significantly cheaper to use HEVC.

High costs for using HEVC
TV manufacturers had already begun implementing HEVC in Ultra HD TVs and streaming services such as Netflix and Amazon had begun using HEVC to stream content in 4K quality. Ultra HD Blu-ray discs will also use the new compression format.

Half a year ago, a new licensing group emerged as HEVC Advance with a plan to charge incredibly high fees for use of its HEVC related patents. Another group, MPEG LA, already charged fees for use of HEVC through its licensing pool. This resulted in royalty payments that were far higher than those of the previous MPEG4 format. But worst of all; there was no cap on royalty payments.

This sent the industry into despair and effectively killed momentum for the HEVC format - and thus 4K content. As a result, seven major players, including Amazon, Netflix, Google and Microsoft, joined forces to create a new, open video format.


New licensing terms for HEVC
The HEVC Advance group has now changed its course. They have reduced HEVC royalties to much lower levels, but more importantly included several exceptions and caps.

Under the new terms, streaming services that are free to use for the viewer (such as YouTube) will no longer need to pay royalties. Electronics manufacturers (such as Samsung and LG) will pay no more than $40 million per year and premium streaming services (such as Netflix and Amazon) will pay no more than $ 5 million per year. Companies that have yet to sign up will also be offered a significant start-up discount.

The new licensing agreement will let major players resume the rollout of HEVC and 4K content without having to worry as much about costs.

Google is offering an alternative to HEVC called VP9, but the format does not yet support HDR (high dynamic range). Apple has not committed to a next-generation format yet even though they have been involved in the development of HEVC. Major TV manufacturers have begun incorporating both HEVC and VP9 in UHD Smart TVs.

HEVC is usually associated with 4K content but it can also reduce the bandwidth required for delivering 1080p HD content.

- Source: HEVC Advance