Bitrate Spend: A Compressed Guide to the Cost of Codecs

NAB Amplify

Transmitting data has a cost — in terms of bitrate and budget which CTOs of streaming media services need to carefully weigh.

https://amplify.nabshow.com/articles/bitrate-spend-a-compressed-guide-to-the-cost-of-codecs/

Bitmovin has crunched the numbers and concludes that a multi-codec approach is best.

That’s important given the codec race that has developed over the past few years. It’s a race that has no clear winner.

“At this point in time, if any OTT or streaming provider is seeking to reach the maximum number of devices at the highest possible quality, adopting a multi-codec approach is your best bet to success,” states The Definitive Guide to Video Codecs. 

“Adopting just two (VP9 and HEVC) will enable an organization to reach roughly 98% of browsers and devices in the US alone.”

Codecs have the potential to significantly reduce the cost of video streaming workflows and operations. This cost is often measured based on file size, storage usage, and bandwidth consumption. Applying codecs is how content distributors can reduce their bitrate expenditure while maintaining a sliding scale of quality.

Any OTT or streaming service provider, implementing one or more types of codec into a workflow, will reduce storage requirements, increase device reach, and reduce the actual cost of transmitting media from A to point B. The question is by how much and at what financial cost?

Bitmovin marks the runners and the riders in its report.

H.264 (AVC)

Advanced Video Coding (AVC/H.264) still holds the lion share of adoption and reach in use by over 90% of video industry developers. Running H.264 for free is technically possible, however,

doing so is not optimized for operations or functionality, per Bitmovin. The current patents can be licensed from MPEG LA for $0.10 – $0.20/device. Subscription-based royalties cost between $25,000 – $100,00 depending on number of subscribers.

VP9

VP9 is the AOMedia consortium’s flagship codec and was primarily developed by Google. It offers at 40 to 45% bitrate advantage over H.264 (AVC). VP9 is technically royalty-free, but Sisvel International charges €0.24 for display devices and €0.08 for non-display devices.

H.265 (HEVC)

High-Efficiency Video Coding, developed by MPEG competes with VP9 and supports up to 8K quality resolutions. Although possible to implement for free with the x265 testing

Implementation, licenses are also issued by MPEG LA for a range of $0.20 – $1.20/device based on volume. Subscription-based royalties cost $0.025/subscriber. Despite these high licensing costs, HEVC is the second most popular codecs around.

AV1

AOMedia’s successor to VP9, the AV1 video codec delivers a 30% bitrate reduction over VP9 to support the rising demand for HDR and 4K video. Although technically released as royalty-free, there remains a controversy to this date, per Bitmovin, as a few organizations have claimed patent licenses over AV1, slowing the overall adoption. Codecs are charged by device at a rate of €0.32 for display devices and €0.11 for non-display devices.

H.266 (VVC)

The Versatile Video Coding codec was made publicly available last October with a 30-50% improved compression rate over H.265 and VP9. Bitmovin reports “little to no adoption” so far as many organizations are still testing its application.

“In addition, the current version of VVC requires too high compute power for most organizations to apply it.” Nonetheless, VVC is considered the codec of the future and can be expected to break into the market in the mid-to-late 2020s.

LCEVC

The newest on the block is the Low Complexity Enhancement Video Coding Codec, verified by MPEG only in March. It improves the encoding results of existing codecs including as much as by 46% when streaming UHD over AVC and 31% over HEVC. According to Bitmovin, LCEVC is even further behind VVC in terms of VVC and can be expected to be adopted around the same time.

V-Nova, one of the contributors to the LCEVC codec, recently announced the official licensing costs. An Integration License for OEMs to integrate V-Nova LCEVC encoding and decoding libraries while a Usage License is priced based on service size, measured via the total number of users. This is capped at $3.7mn per year.

According to Bitmovin, organizations plan to adopt AV1, more than any other codec on the market. However, VVC and LCEVC are judged the most efficient compression codecs that offer the largest size reduction with the least amount of quality loss.

Cost of Technical Churn

In a related report, Bitmovin analyzes the costs of glitches or errors in streaming. These glitches — such as failure to launch a video on time — are nothing new, nor will they entirely disappear for the foreseeable future but do contribute to subscriber churn.

Leaning on a report by streaming service Vimeo, Bitmovin calculates that OTT providers are experiencing a 6.6% error rate across their services. Another way of putting this is that “unclear” or “ambiguous” errors are costing OTT providers five days of a customer’s loyalty to a service.

And if one puts that in monetary terms, which Bitmovin handily does, by reducing those errors for an SVOD service with 1 million subscribers and an assumed $15/month subscription fee, the five days increased in lifetime value for the technical churner segment would result in an estimated revenue increase of $160,000.

Numbers to reckon with.