AV1 vs VVC Licensing Costs: Key Differences

The ongoing transition to next-generation video compression has placed AV1 and Versatile Video Coding (VVC/H.266) at the center of industry adoption discussions, with licensing structures serving as the primary point of divergence. While AV1 was created to eliminate financial barriers by providing a completely royalty-free, open-source standard, VVC maintains the traditional commercial model of paid, multi-pool patent licensing. Understanding these distinct financial frameworks is crucial for streaming platforms, hardware manufacturers, and software developers evaluating deployment costs.

AV1: The Royalty-Free Model

AV1 was developed by the Alliance for Open Media (AOMedia), a consortium of tech giants including Google, Amazon, Netflix, Apple, Microsoft, and Meta. Its licensing model was built specifically to solve the cost and fragmentation issues of previous standards:

• Zero Royalty Fees: AV1 is free to implement in both hardware and software. There are no per-unit fees for decoders or encoders, and streaming platforms are not charged royalties based on content distribution, subscriber counts, or stream hours.
• Open-Source Licensing: AV1 source code is distributed under permissive open-source licenses, allowing companies to integrate and modify the code without paying licensing administration fees.
• Defensive Patent Cross-Licensing: AOMedia members cross-license their patents relevant to AV1 royalty-free. If a member company files an infringement suit against another member over AV1, that company loses its royalty-free license to the codec.
• Third-Party Pool Risks: Despite being designed as royalty-free, AV1 has faced licensing claims from external patent administrators, such as Sisvel, which launched an independent AV1 licensing pool. However, AOMedia maintains that AV1 does not infringe these patents and provides legal defense assistance to members.

VVC (H.266): The Multi-Pool Commercial Model

Developed jointly by the ITU-T and ISO/IEC MPEG groups, VVC provides significant compression gains over its predecessor, HEVC (H.265), but relies on a proprietary, fee-based licensing structure:

• Fragmented Patent Pools: VVC does not have a single, unified licensing body. Licensing rights are split primarily among multiple administrators, including Access Advance and the Via Licensing Alliance, alongside individual patent holders who license independently.
• Per-Unit Device Royalties: Manufacturers must pay a per-device fee for smartphones, smart TVs, set-top boxes, and personal computers that include VVC hardware decoders. These fees generally range from fractions of a dollar to over a dollar per unit, depending on annual production volume, pool caps, and implementation types.
• Annual Caps: Most VVC pools implement annual royalty caps (often running into tens of millions of dollars) to make costs predictable for large hardware manufacturers, though these caps can still represent a significant expense compared to zero-royalty alternatives.
• Content and Software Royalties: A significant concern in the HEVC era was whether content distributors would be taxed on streaming output. While major VVC pools have largely avoided charging royalties on non-physical content distribution and pure software decoders distributed without hardware, navigating the terms of multiple patent holders remains a legal and financial challenge.

Key Financial Takeaways

The fundamental difference between AV1 and VVC comes down to certainty and direct expense:

1. Direct Operational Costs: AV1 has no scheduled per-unit or content fees, making it vastly cheaper to scale for web-based services and mass-market consumer applications. VVC requires direct recurring payments tied to unit shipments.
2. Administrative Complexity: AV1 operates under a single license framework backed by AOMedia. VVC requires organizations to negotiate with multiple patent administrators to achieve total patent coverage, increasing legal overhead and the risk of royalty stacking.
3. Target Implementations: AV1’s zero-cost model makes it the standard of choice for web browsers, open-source projects, and high-volume streaming platforms. Conversely, VVC's royalty structure targets traditional broadcast ecosystems, premium consumer electronics, and specialized hardware where licensing fees can be absorbed into physical product pricing.