Goodbye to the Video Store (continued 3/5)

For codec makers, the aim will be to become the standard means for compressing all those thousands of movies that will be streamed into millions of homes. Doing so could make one company (or, in the case of MPEG-4, one consortium of patent holders) very wealthy.

Today, it is still not clear whether a single codec will emerge as the prevailing standard—just as MP3 reigns over the audio world. Nor is it yet clear whether future set-top boxes will become more like a PC, with their own microprocessors and built-in software to juggle multiple codecs. The answer could come when some media mogul—say, Jim Ramo, the boss of Movielink—chooses a single codec to compress all his company's content. That would oblige set-top-box makers to build compatible devices, rendering all other codecs instantly obsolete.

In the meantime, few are hanging around for that day to arrive. Instead, codec firms, envisaging an imminent gold rush, are spending millions promoting themselves to content providers and electronics companies. These, in turn, are hoping to avoid the blunders made by the music industry when it failed to embrace the money-spinning potential of MP3 until it was too late.

At the moment, MPEG-4 has a head start in the race to become the prevailing codec for streaming digital video. In essence, MPEG-4 is a set of technical specifications that define a patented process for compressing and decompressing video. Because nearly 90% of Internet users connect over a dial-up line, the previous version of the codec, MPEG-2, would quickly clog the pipes. MPEG-4 tackles this problem by slashing the bandwidth requirements to as little as 40 kilobits per second—ssome 50 times leaner than MPEG-2—swhile preserving clarity. At higher bit rates, MPEG-4 manages near-DVD quality.

The trick MPEG-4 uses to render crisp video without hogging bandwidth is a process known as “sobject- based compression”s. Previous MPEG schemes simply divided each video frame into a grid, then tagged each block with a unique data signature. MPEG-4 begins with this strategy but takes compression a step further. Instead of capturing the sum total of each frame, MPEG-4 considers separate regions within the picture and decides how to handle them on the fly. For example, if the background between two consecutive frames remains unchanged, while the foreground varies, MPEG-4 will compress the static background and treat the image as a still picture. As MPEG-4 streams video over a network, static backgrounds are sent once, reserving bandwidth for dynamic parts, which have to be compressed and retransmitted as they shift positions.

Overall, MPEG-4 incorporates 23 different mathematical profiles. These enable users to adapt its algorithms to operate on a variety of devices, including pocket PCs and set-top boxes. Despite that, Mr Jones reckons that other, newer codecs could win the battle to rule the set-top box. The reason is MPEG-4's tough licensing terms. Anybody wanting to integrate MPEG-4 into a particular video streaming device must pay stiff royalties to a group of 23 companies, which together own several hundred related patents.

Between them, the consortium members have established an independent licensing body called MPEG LA to hammer out royalty agreements between MPEG-4's patent holders and the companies hoping to use the codec. Larry Horn, vice-president of licensing and business development at MPEG LA, explains that the licence is non-exclusive, giving any firm the right to negotiate a royalty deal.