MPEG LA, which represents 18 patent holders that have claims on underlying MPEG-4 technology, set licensing terms in November after concern that the original royalty rates priced adopters such as Apple out of the market. At the time, fees did not include its current $1m cap on usage fees or a 50,000 threshold. RealNetworks offers comparable pricing to that of Microsoft's with its Helix DNA Audio and Video. Still, MPEG LA spokesman Larry Horn said that licensing fees will not be the deciding factor for companies adopting advanced digital media technology, but rather quality and interoperability. He added that many people have found MPEG LA's licensing fees reasonable and can build them into a working business model. "The marketplace is going to decide which technology it wants to use," he said. "There are choices that go with using a proprietary technology -- those that do, do it at their own peril." Rob Koenen, president of the MPEG-4 Industry Forum, said that competition in licensing fees in general is positive. But he pointed out that "Microsoft's licensing fees are for the use of technology and don't necessarily cover an indemnification, while MPEG LA's licence covers patent rights and comes without technology." "With MPEG LA, as with any licence, you're getting insurance. It's buying off risk," Koenen said. Microsoft did not comment on the patent licence. A downside of MPEG-4's licence is that it may be too complicated and not conducive to certain markets such as ad-supported Web publishing, Koenen said. For example, MPEG LA asks 2 cents per hour for high-value MPEG-4 content when distributed on a DVD. But extending the same 2 cents per hour to ad-supported MPEG-4 services, which have a less proven and lucrative business model, may well not work, he said. "We are all for open standards, but we live in a landscape where there is competition as well," he said. "But I also note that if people want open standards to be a success then the patent licence needs to be reasonable and nondiscriminatory such that they allow services and products to be competitively priced." MPEG LA's Horn countered that the royalty rates don't apply when there is not a business, but people still are working these models out. MPEG-2, which was established about five years ago, faced similar hurdles in gaining acceptance and understanding in the marketplace when first introduced. As many such issues get ironed out, supporters of MPEG-4 want to ensure that it has room to prove itself in the market. "Consolidating all that control in Redmond, Washington is not good for the consumer and the industry," iVast's Broadwin said.
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