The $5 Million Dollar H.264 Expensive License Myth

Thursday, February 4, 2010
By OP Editor

Rumors are that it’s expensive to license the Apple supported H.264 video compression. Some say that the royalty costs $5 million dollars. But does H.264 video compression really cost $5 million to license? Is it expensive? Not exactly.

H.264 5 million dollars licensing myth, Dr Evil

H.264 Apple Exclusive?

H.264 is Apple’s preferred video codec for Quicktime, iTunes Store, iPod, iPhone, and the upcoming iPad tablet.

Myths like to portray H.264 as a locked, problematic, Apple exclusive format, but the myths are wrong. H.264, part of the ISO standard MPEG-4 (mp4), is a scalable format with wide range of applications. Numerous companies in telecommunications, consumer electronics, and broadcast industries all use H.264 due to the benefits of H.264 video compression.

For example, Google’s YouTube, Vimeo’s video services, Blu-Ray players, video cameras, set-top boxes, and many video conferencing products all use H.264.

H.264 Myth: Expensive, $5 Million License Fee

The myth is that it’s expensive to license H.264. Some sites even imply that an investment of $5 million is required to license H.264.

But what is the true cost of licensing H.264?

No Royalty: Free Internet Videos

MPEG LA, the non-partisan licensing firm announced this week that internet video using AVC / H.264 (MPEG-4 Part 10) that is free to end users will continue to be royalty free at least until 2016. This includes popular video services such as Google YouTube and Vimeo.

Royalty Free: Up To 100,000 Units Per Year

H.264 has no royalty cost for products sold up to 100,000 units. This royalty free license is available to one legal entity in an affiliated group.

$0.20 Per Unit

H.264 license royalty is $0.20 per units for products sold between 100,000 to 5 million units.

$0.10 Per Unit

Products with sales above 5 million units per year pay $0.10 royalty per unit.

H.264 Royalty Cap = $0.0X, Pennies Per Unit

The $0.10 per unit H.264 royalty is capped at the maximum fee of $5 million in 2010. So the actual cost of H.264 for large businesses can be pennies per unit.

Here’s the slide on the tiered H.264 cost:
h.264 Five Million Dollars Expensive License Myth

Is H.264 Expensive?

Some pundits like to imply that H.264, which is used by Apple and Google, will hinder the digital age, because H.264 is not free nor open-source.

To put things in perspective, even without putting the H.264 royalty fee in the context of per-unit-pricing that starts from royalty-free, the $5 million licensing cap is a very small amount to pay for a large business. It is not cost prohibitive, and it will not hinder commerce.

For example, instead of actually investing into competent R&D, Microsoft regularly spends hundreds of millions of dollars per year for its various failed products. To support the Vista launch, Microsoft is reported to have spent half-a-billion dollars in advertising. The $500 million dollars doesn’t even include the hundreds of millions of dollars Microsoft spent later trying to persuade PC users to buy the poorly reviewed Vista.


So, in summary, what is the real Cost of H.264?

Is H.264 free? No. Is it expensive? no. Does it cost $5 million dollars for each business? No. Therefore, the H.264 licensing is certainly not cost prohibitive to businesses.

A certain FUDster even said “the problem with h264 is that it’s patent encumbered. Unfortunately the FUDster ignores the fact that H.264 has been used in various products since 2003 without any of the imagined “potential” problems coming true.

And no, Apple didn’t use H.264 to lock users into problematic, expensive format.

Next article will provide an overview of H.264 vs. Ogg, and why businesses choose H.264 / MPEG4.

AVC License, February 2, 2010 [mpegla]
via H.264 Will Stay Royalty-Free for Free Internet Video Through 2016 [cultofmac]

Gallery: The $5 Million Dollar H.264 License Myth


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Tags: Apple, H264, Myths, Technology

10 Responses to “The $5 Million Dollar H.264 Expensive License Myth”

  1. Adric Antfarm

    I have no idea what you are on about with codecs and such, but thank you for posting on the Shutter Reloaded page.

    I am having the same issue with the page reloading after an image is displayed and was sure it was something I did.

    • Thanks for visiting. H.264 is used for video compression for YouTube, Apple software and devices. It’s a technology that some obscure people have misconceptions about.

  2. lucideer

    Thanks for an informative article, it cleared up some things about H.264 for me that I was unclear on. Hilariously, you’ve actually convinced me of precisely the opposite of what you seem to have intended… unless I’ve misread your post of course. You do realise the content of your post actually contradicts your title – i.e. you go on to prove that it is in fact not a myth.

    You say – “The $0.10 per unit H.264 royalty is capped at the maximum fee of $5 million in 2010. So the actual cost of H.264 for large businesses can be pennies per unit.”
    The “myth” you’re referring to is that it would cost $5million to implement H.264 in Mozilla products (that is where this originated). In order to reach the $5million cap you mention, one would have to distribute $5million/$0.10=50million products with H.264 support, whereas Mozilla distribute hundreds of millions of products. Even tiny contenders in the browser market such as Opera would still exceed the 50million mark. Many of these companies are exclusively distributing free products, and don’t have other business interests that would also benefit from video licencing (as Apple does).

    Secondly, you also say:
    “internet video using AVC / H.264 (MPEG-4 Part 10) that is free to end users will continue to be royalty free at least until 2016″

    HA! And what then? You must be seriously short-sighted if you think only the next 5/6 years matter. The technology for GIF images was patented 23 years ago and they’re still charging for it today – even if H.264 video is superseded by something better (as GIF was) it will still continue to be used and be required long afterwards (as GIF still is today).

    • nobodyreally



    • @lucideer,
      Um, no. Got something long half written about this, among some of the hundreds of story leads.

    • Enantiomer2000

      Lucideer cut right to the bone on this one. Well put indeed. Why not go with a truly open standard that costs nobody anything? One answer please? For love of evil.

    • Have not gotten around to the article yet, but basically,

      1. Mozilla makes a ton of money every year, and can afford to pay.
      2. There is an open source H.264 project where the cost is zero.
      3. Using quicktime for H.264 = cost is zero.

    • lucideer

      1. OK – So you at least now admit they WOULD have to pay the $5mil – contrary to saying the opposite in your original post. Maybe the could afford it (I don’t know tbh) but they’ve claimed they can’t, and other smaller competitors like Opera CERTAINLY can’t (and yes Opera also cross the unit distribution limit – they double it in fact).

      2. There’s a what?

      3. Using an Apple product eh? Hrmm…. and one wonders why Apple are so supportive of h.264. Yes, one could also just use the Safari browser, but this entire debate is about a little thing called a competitive market, and avoiding a little thing called vendor lock-in, or “a monopoly”! Seriously – “just use Quicktime” is really your best response?

      I’d also be interested to know why you’ve deleted other comments on this post that put forward arguments against h.264 (particularly TheOnlyKingArthur’s well worded comment that’s mysteriously disappeared)…

  3. Ric

    One other point that I have not heard considered is what costs of the audit work on tracking all this video traffic and how informative it might be. Lots of accountant type employment going on here.

    If we can track the world we can set traps for the poor fools that follow.

    Good response.

    This op editor sounds like he is embedded with Microsoft. They believe that open source is a Virus on capitalism.

    I am still trying to understand the Apple position. First they get the Xerox PARC stuff for noting, then they take BSD and tweak it to make OS X and then complain about open source?

    • FAIL. Apple paid for Xerox technology. Microsoft stole it from Apple. Most of what you think it’s GUI, such as pull down menu, drag and drop, are invented by Apple:

      Ever use a DVD? It uses “proprietary” technology. Blu-Ray uses H.264 and the world isn’t falling apart. Ever been to a large retail store of any kind? They use proprietary supply chain management technology. Ever drive a car? It’s got proprietary parts. Actually pretty much everything in the world has proprietary parts. It’s called capitalism.

      Too bad the freetards have no clue on how the world works. As to “free” society? It’s been tried — communism already failed.

      As to the Apple takes from open-source opinion? The open-source community has benefitted by Apple development too, as Apple also releases technology to the open-source crowd.

      For example, the very difficult to implement parallel computing is made easy with Apple’s “Grand Central Dispatch,” which Apple ported to FreeBSD.


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