technology THERE ARE THREE INEVITABILITIES IN LIFE: death, taxes – and that anyone involved in a consumer electronics format will have to pay royalties and licence fees to manufacture product, whether it’s hardware or software. So it’s no surprise that the Blu-ray Disc format attracts a fair number of licensors – exactly how many is uncertain, although some think the number is at least 20. Everyone in the optical disc industry wants Blu-ray to succeed, especially now that DVD margins are becoming increasingly thin and more consumers are looking to watch videos online or download them onto their PC. There are many factors that will determine the success or failure of Blu-ray. One is the number of parties that are prepared to invest in the format. Part of this investment includes licensing fees, but it also includes the time needed to obtain the relevant licences. There is general agreement that the current Blu-ray licensing process is unsatisfactory and that a number of issues need to be addressed if Blu-ray is to get the widest range of content possible to make it an even more compelling format. Bruce Nazarian, president of the International Digital Media Alliance (IDMA), says BD licensing is “not necessarily overly complex, but it is more complex than licensing DVD, and has many a first-time BD publisher slightly confused”. Rolf Hartley, senior vice president and general manager for premium content applications at Sonic Solutions, adds:“There are about 20 agencies governing Blu-ray licensing, covering device manufacturers, content holders and software vendors such as Sonic.” So what are the licensing issues and what is being done to address them? The first is the sheer number of parties that have their hands out requesting a licence fee right along the BD chain. BD licensors can be divided into three groups: the Blu-ray Disc Association (BDA), AACS, and miscellaneous patent holders of the technology used by BD, such as video codecs. A second issue is the licensing process – some systems are unwieldy or fail to fully take into account the BD production process. Finally, there is the cost, with cumulative licensing fees accounting for a substantial proportion of a BD disc’s manufacturing cost. BEFORE A CONTENT HOLDER CAN PUT CONTENT onto a BD disc and get it replicated, the holder needs to be licensed by the BDA licence entity.The BDA’s licensing activities include distributing the BD format books, logo guide and data, and issuing a compliance certification after a BD disc has undergone a stiff verification and testing process. There are several elements to the BD licensing scheme. Content holders, distributors and providers wanting to put content onto BD must take out a Content Participant Agreement, which costs $3,000 a year and runs for five years.There’s also a ‘light’ version that costs $500 a year and also runs for five years.There is no fee for the use of a Logo Licence Agreement, and there is an optional BD-Live Logo and Online Certificate Issuance Agreement, which incurs no charge, although there is a fee of $1,000 per private key. There are other BD licensing obligations. Disc replicators need to take out a BD-ROM mark interim agreement with Sony, Philips or Panasonic, while content providers must take out an AACS licence (see table, page 18). There’s also the option of taking out a BD+ licence for enhanced copy protection available from BD+ Technologies. Eric Carson, business unit manager, media manufacturing solutions, DCA, says:“The ROM mark is a nightmare – it’s the biggest pain point. Sony and Philips have different licences, so it’s not just about cost but what licensing terms you prefer.”The cost of a BD+ licence depends on the type of agreement. The actual 16 | one to one | April 2009 www.oto-online.com A number of issues need to be addressed if Blu-ray is to fulfil its potential. Key is the cost of obtaining the necessary licences and the time involved in doing so, writes George Cole Counting the cost of Blu-ray licensing Some fees have been reduced but is it enough? “EVERYONE WANTS TO SEE BLU-RAY DISC ADOPTION EXPAND WHILE MAINTAINING THE COPY AND IP PROTECTION THAT AACS BRINGS. BUT THE LICENCE AND FEE STRUCTURE NEEDS TO BE SIMPLER AND LESS EXPENSIVE” ROLF HARTLEY, SONIC SOLUTIONS
Transcript
technology
THERE ARE THREE INEVITABILITIES IN LIFE:death, taxes – and that anyone involved in aconsumer electronics format will have to pay
royalties and licence fees to manufacture product,whether it’s hardware or software. So it’s no surprisethat the Blu-ray Disc format attracts a fair number oflicensors – exactly how many is uncertain, althoughsome think the number is at least 20. Everyone in theoptical disc industry wants Blu-ray to succeed,especially now that DVD margins are becomingincreasingly thin and more consumers are looking towatch videos online or download them onto their PC.
There are many factors that will determine thesuccess or failure of Blu-ray. One is the number ofparties that are prepared to invest in the format. Part ofthis investment includes licensing fees, but it alsoincludes the time needed to obtain the relevantlicences.There is general agreement that the currentBlu-ray licensing process is unsatisfactory and that anumber of issues need to be addressed if Blu-ray is to
get the widest range of content possible to make it aneven more compelling format.
Bruce Nazarian, president of the InternationalDigital Media Alliance (IDMA), says BD licensing is “notnecessarily overly complex, but it is more complex thanlicensing DVD, and has many a first-time BD publisherslightly confused”.
Rolf Hartley, senior vice president and generalmanager for premium content applications at SonicSolutions, adds:“There are about 20 agencies governingBlu-ray licensing, covering device manufacturers,content holders and software vendors such as Sonic.”
So what are the licensing issues and what is beingdone to address them? The first is the sheer number ofparties that have their hands out requesting a licencefee right along the BD chain. BD licensors can bedivided into three groups: the Blu-ray Disc Association(BDA), AACS, and miscellaneous patent holders of thetechnology used by BD, such as video codecs. A secondissue is the licensing process – some systems are
unwieldy or fail to fully take into account the BDproduction process. Finally, there is the cost, withcumulative licensing fees accounting for a substantialproportion of a BD disc’s manufacturing cost.
BEFORE A CONTENT HOLDER CAN PUT CONTENT onto aBD disc and get it replicated, the holder needs to belicensed by the BDA licence entity.The BDA’s licensingactivities include distributing the BD format books, logoguide and data, and issuing a compliance certificationafter a BD disc has undergone a stiff verification andtesting process.
There are several elements to the BD licensingscheme. Content holders, distributors and providerswanting to put content onto BD must take out aContent Participant Agreement, which costs $3,000 ayear and runs for five years.There’s also a ‘light’ versionthat costs $500 a year and also runs for five years.Thereis no fee for the use of a Logo Licence Agreement, andthere is an optional BD-Live Logo and Online CertificateIssuance Agreement, which incurs no charge, althoughthere is a fee of $1,000 per private key.
There are other BD licensing obligations. Discreplicators need to take out a BD-ROM mark interimagreement with Sony, Philips or Panasonic, whilecontent providers must take out an AACS licence (seetable, page 18).There’s also the option of taking out aBD+ licence for enhanced copy protection availablefrom BD+ Technologies.
Eric Carson, business unit manager, mediamanufacturing solutions, DCA, says:“The ROM mark is anightmare – it’s the biggest pain point. Sony and Philipshave different licences, so it’s not just about cost butwhat licensing terms you prefer.”The cost of a BD+licence depends on the type of agreement.The actual
16 | one to one | April 2009 www.oto-online.com
A number of issues need to be addressed if Blu-ray is to fulfilits potential. Key is the cost of obtaining the necessarylicences and the time involved in doing so, writes George Cole
Counting the costof Blu-ray licensing
Some fees have been reduced but is it enough?
“EVERYONE WANTS TOSEE BLU-RAY DISCADOPTION EXPANDWHILE MAINTAININGTHE COPY AND IPPROTECTION THAT AACSBRINGS. BUT THELICENCE AND FEESTRUCTURE NEEDS TOBE SIMPLER AND LESSEXPENSIVE”ROLF HARTLEY, SONIC SOLUTIONS
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BD licensing process is not too onerous and involvesdownloading documents from the BDA website andcompleting the appropriate details, returning thedocuments to the BDA – and then paying the licensingfee on request.
THE MOST CONTROVERSIAL ASPECT OF BLU-RAYLICENSING is the mandatory requirement to use AACSon all BD-ROM titles, regardless of their target audience.As Hartley explains:“Replicating a promotional (free) BDtitle is certainly more expensive than DVD, because the
content holder is required to use AACS. CSS, forexample, is not required for DVD replication.”
Bob Orzack, vice president at Cine Magnetics and amember of the American Independent MediaManufacturers Association (AIMMA) licensing taskforce, says the AACS licensing process is “extremelydifficult and expensive”. AACS licensing documents runto more than 100 pages.
In a company blog, Orzack outlined the difficultiesAACS presents to smaller content providers:“Thesimplest arrangement between the rights holder and
AACS is called a Content Provider Licence. For a one-time fee of $3,000, they will give you a licence numberto work with Blu-ray replicators.The replicator cannotaccept an order from anyone without this licence andassociated licence number. So, now you have yourlicence and you are ready to replicate.
“Well, not quite… When the material is sent to thereplicator, you will be charged the following fees by thereplicator (which are mandatory and, by the way, keepchanging). First, you will be charged for the AACS MediaKey that encrypts the content of the disc, and an AACSContent Certification for that title, followed by an AACSOrder Processing fee.This is for every Blu-ray title andthe average cost for all three is around $1,700. So, youhave now spent $3,000 for the Content Provider Licence
and you will be spending $1,700 for keys, certificationand processing per title. Now we are finally ready toreplicate DVD Blu-ray – if you have any money left.”
Others are critical too, including Carson:“AACS is notso bad once you figure out the system, but you areexpected to fill in a lot of paperwork and it’s still anexpensive deal.”
Guy Marriot, chairman of the International OpticalDisc Replicators Association (iODRA), notes:“The AACSprocess is slow and expensive for a customer with onlya short-run requirement.”
“THE AACS PROCESS ISSLOW AND EXPENSIVEFOR A CUSTOMER WITHONLY A SHORT-RUNREQUIREMENT”GUY MARRIOT, IODRA
An at-a-glance guide to BD licensing
Source: One To One Magazine
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Bob Edmonds, vice president sales and marketing atEclipse Data, says:“The actual AACS licensing processisn’t that difficult; it’s a case of ‘sign here and send acheque’.” He adds:“As well as purchasing the mainlicence, we also have to purchase keys for our softwareto be able to encrypt and decrypt images.The cost ofthe keys is not huge (about $100) but theadministration fee is about $1,000-$1,500.What’s more,some of the keys have a limited lifetime, and after 18months they expire and you have to purchase new keys.You have to make sure that your customers have thelatest set of keys. It’s not so much the key cost, but theadministration costs that make this process expensive.”
Michael B Ayers, chair of the AACS business groupand manager of AACS LA, says:“AACS is only one part ofthe many elements that are needed to go into BD discproduction. However, we are very mindful of theconcerns of smaller licencees, and pass on cost savingsin the form of reduced fees whenever possible.We havereduced fees for Content Certificates, for instance, twicesince our launch three years ago.”
Ed Younger, Eclipse Data’s sales manager for Americas,agrees that prices have fallen:“The early adopters [forBlu-ray] were the big studios.They are part of AACS LAand see it as a necessary evil, but smaller independentssee the costs as a barrier for getting into Blu-ray. If you’reproducing 5,000 discs and it costs you $1,500 per title,that adds more than $3 per disc. However, it used to cost$2,500, so AACS LA has reduced its fees, and ourcustomers have seen some fee reductions.”
Hartley says:“There’s a balancing act for AACS LA toensure a quality of service to licensees while providinglower fees to lower volume content holders. Everyonewants to see Blu-ray Disc adoption expand whilemaintaining the copy protection and IP protection thatAACS brings. At the same time, the licence and feestructure needs to be simpler and less expensive tofoster such adoption. Even so, many non-Hollywoodcontent providers are choosing to release titles on Blu-ray because the format is selling well.”
BUT EVEN TAKING OUT AN AACS LICENCE INCURSADDITIONAL FEES. A mandatory part of the licenceincludes allocating an International StandardAudiovisual Number (ISAN) to each BD title for uniqueidentification.“The cost of an ISAN for a Blu-ray Disc iscomposed of two elements: the ISAN allocation whenregistering the work; and the V-ISAN (version ISAN)allocation when registering the specific version of thatwork,” explains Patrick Attallah, ISAN’s CEO andmanaging director. In the UK, element one costs £10.50($15) and element two is £3 ($4) per version (forexample, Blu-ray or DVD) – the fee remains the same
regardless of the number of copies produced for eachversion. AACS licensees also have to appoint registeredagents in the US to deal with the legal documentation.
Ayers says these additional elements add little to theoverall cost of an AACS licence, and in the long run,actually save money:“ISAN is a useful element,although the pricing we can’t control. As for therequirement to appoint an agent, well, that’s to makesure that if there’s a dispute, AACS can address it ascost-effectively as possible. If we had to use the courts itwould be very costly and this would be reflected in ourfees. As it happens, using an agent costs about a coupleof hundred of dollars a year – it’s not expensive.”
But Ayers accepts that there are some issues withthe AACS licensing process, as Hartley points out:“Whenyou send a BD title for replication, you’ll be charged acontent certificate of $500 per certificate for each glassmaster, as well as an $800 AACS processing/handlingfee. If there’s an authoring error or you choose to changeanything on the disc for creative reasons, you’ll have topay for a new content certificate when you resubmit thetitle for replication.This can be expensive and is a realconcern for non-Hollywood content holders, becausecheck discs can often breed changes.”
Nazarian says it’s an issue that concerns hisorganisation’s members:“The recurring per-title fee of$1,300 is actually required each time a BD master iscreated, which means if an authoring mistake is found,the producer needs to pay another $1,300 AACS fee(plus remastering fees) in order to create thereplacement master.”
FROM 27 FEBRUARY 2009, AACS LA stopped issuing itsinterim licensing agreement, which had been in forcesince BD’s launch. It’s now preparing to publish a finallicensing agreement, and Ayers says that AACS LA has“learned lessons along the way during the interimprocess that have allowed us to refine it to better fit therealities of device manufacturing and disc production”.
When asked to elaborate, Ayers adds:“We’ve hadconcerns with a number of device manufacturers,content holders, replicators, and authoring andmastering houses.We’ve heard some of the thingsthey’ve said and plan to make changes in the finalagreement to address them.”
Although Ayers is not in a position to give details ofthese changes, he says that areas such as how thelicensing fees are structured, who pays for what andwhen, and the timing and reporting processes, are justsome of the issues being addressed.
When it comes to the content certificate issue, Ayerssays:“We have heard concerns about that and there is alittle wrinkle in the process.We understand that it can
prove costly for some and we are taking that intoconsideration.” Ayers points out that the problem is thatAACS works with a key-generation facility and there isno way of knowing if a content certificate is a repeat ornot.“The same work goes into generating a key,whether it’s the first or the 20th,” he notes, adding,“we’re working on a new agreement with our key-generation facility that will give more flexibility.”
Finally, Ayers stresses that AACS LA members (whichinclude Microsoft, Intel, Sony, Disney and Warner Bros)do not get favourable licensing deals:“The AACSfounder companies wishing to also implement theAACS technology sign the same licence agreements,and have the same obligations, as every other licensee.”
Blu-ray Disc uses highly sophisticated technology, soit’s little wonder that there are a potentially largenumber of patent holders to whom royalties will haveto be paid. Carson explains:“We wanted to build asoftware player emulator product and got contacted byanybody and everybody who had a patent claim.Wehad to sort through all of those – there’s no single body.It would be good to see a single IP pack that covered allthe relevant patents, because the cost of administratingpatents is outrageous.” Nazarian adds:“The licencesshould be more fully explained on the AACS and BDAwebsites, with a specific procedure spelled out forobtaining a licence, and the specifics of which entitycontrols which licences.This is especially necessary, asAACS LA allows the replicators to administer much ofthe title key and per-disc royalty fee collection, whichmost folks don’t expect.”
Younger says:“There are so many potential royaltypayments that we’ve created a software guide modulefor our customers, to help them track the various audioand video codecs contained in the discs they areproducing. At some point, royalties will be collected sothey need a simple method to collect this information.”
Marriot notes:“The only company with Blu-raypatents that has announced a replicator licensing
“BD LICENSING IS NOTNECESSARILY OVERLYCOMPLEX, BUT IT ISMORE COMPLEX THAN LICENSING DVD,AND HAS MANY AFIRST-TIME BD PUBLISHER SLIGHTLYCONFUSED”BRUCE NAZARIAN, IDMA
Disc replicators need to take out a BD-ROM mark interim agreement with Sony, Philips or Panasonic
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scheme is Philips. Sony has put a ‘discussion document’ on its website suggestingrates for a Sony-only licence for Blu-ray patents.”
Philips’ BD licensing scheme charges 3 euro cents per BD-ROM data disc, 4 eurocents per movie ROM disc, and 6 euro cents per BD recordable or rewritable disc. Sonyis proposing a royalty fee of 1.5% of the net selling price or 3 US cents per BD-ROM disc(whichever is the greatest) and 1.5% of the net selling price or 6 US cents per BD-R/REdisc. It’s a confusing business.
Marriot adds:“My understanding is that replicators pressing Blu-ray Discs areeither entering into an agreement with their customer for the customer to pay the
royalty liability – when known – or the replicator is making an accrual of around 20 or25 US cents for the royalty liability when known.”
Edmonds says:“I am sure that our customers would appreciate a patent andlicensing pool; a single organisation that would take care of this, similar to MPEG LA. Iexpect something like this will emerge.” Moves to create a common patent pool forBD are indeed occurring, although progress is slow.
Marriot says:“No other Blu-ray patent holder has proposed any licensing scheme,although MPEG LA continues in its efforts to put together a Blu-ray licensing patentpool. It is possible that an MPEG LA pool may exclude Philips, Sony and Panasonic,which are said to be talking together about forming a separate patent pool.”
MPEG LA licences provide coverage under patents essential for use of varioustechnology standards, including: MPEG-2 Video and Systems, AVC/H.264,VC-1, MPEG-2Systems and IEEE 1394. Royalties for packaged media are on a per-MPEG-2 video eventor per-disc basis.The royalties for AVC/H.264 and VC-1 packaged medium products areon a title-by-title basis. In the case of optical discs, it is MPEG LA’s policy to offer itslicences to the replicator or duplicator producing the discs containing video content.
“MPEG LA has been working with 19 companies that own patents essential to theformat to create a joint licence,” says an MPEG-LA spokesman.“Since the Blu-ray Discspecification prescribes the use of MPEG-2, AVC and VC-1 video compression, ourlicences for those technologies also are relevant for Blu-ray Disc products.”
There is near-universal agreement that the current BD licensing system needssimplifying and that costs should be reduced. Philips even says that its unilateral BDlicensing system is being offered:“In anticipation of the future launch of a joint Blu-ray Disc licence programme, in which the patents of a number of companies arecombined in one single licence agreement.”
The BDA also thinks that it’s in everyone’s interest to have a patent pool for theformat. However, it’s unlikely that there will ever be a one-stop shop for BD licensing.In addition to a possible patent pool formed by Philips, Sony and Panasonic, Ayers saysthat AACS LA has not been asked about pooling its patents, adding:“It is somethingwe would have to consider very seriously, because AACS is not specific to Blu-ray Disc.We are not against such a move, but it’s not up for consideration at this time.”
There is optimism in the industry that some form of BD patent and licensing poolwill emerge, if only because it’s in everyone’s interest to reduce the time and costs ofdealing with licensing issues. If Blu-ray is to become the new standard for home videoentertainment, then its licensing system will need a radical overhaul.
“WE HAVE REDUCED FEES FORCONTENT CERTIFICATES TWICE SINCEOUR LAUNCH THREE YEARS AGO”MICHAEL B AYERS, AACS LA
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