[M4IF Discuss] AAC Licensing proposal

[Fischer, Andrew]

Jim:
Thanks for the opportunity to clarify some aspects of the MPEG-4 AAC
licensing terms.
Your first set of questions...
>> I read this to be FREE products.
>> This would be all the streaming players
>> wouldn't it.  Does the maximum go for both?
>>  What hardware can there be in this
>> category - Free cell phones?

... relate to the licensing terms for PC-based software. The maximum annual
payments of $25,000 in the case of PC-based software decoders and $250,000
in the case of PC-based software encoders are intended to be flexible enough
to accommodate even business models that include the provision of PC-based
software at no-charge to end-users.  "Free" PC-based decoders are the rule
rather than the exception, and an annual fee of $25,000 is low-enough for
any company with a significant (understood as generating significant
revenue) business to be able to offer PC-based AAC decoding on that basis.
These low annual maximum payments apply only to PC-based software.  A CD or
DVD player is not a PC, a PDA is not a PC, a portable digital audio player
is not a PC and  televisions, set-top boxes, or radio receivers are not PCs.
The "Standard Rates" (please see www.aac-audio.com/licensing) apply to such
devices.  It's true that properly equipped PCs can play CDs or DVDs or even
receive television or radio signals, and in the case of PC-based playback,
generous terms for AAC decoding are available.  This, in our view, is
necessary in order to make MPEG-4 AAC an attractive alternative to both
proprietary (WMA) or even MPEG (MP3) technologies which are available to
companies that provide PC-based products at no or very low cost to
end-users. We believe that this approach is essential for MPEG-4 AAC to be
successful.
>> I understand this would be iTunes, etc.,
>> That may be  a reasonable amount $250,000
>> for Apple.  Again what hardware devices would be free?

There are no royalty-free products.  In the case of PC-based decoders and
encoders, there maximum annual payments.  In the case of non-PC software or
hardware devices, there are no such "caps."
>> This seems to me to be high if we are
>> talking about QT Pro, or many other commercial
>> software products that are in that price
>> range, but probably acceptable for DVD-type
>> players and any recording devices. If I understand
>> this correctly we won't see many shareware 
>> software-based AAC rippers.  This is for
>> instance much higher than the current mp3
>> encoder licences isn't it?

Here you are referring to the standard rates for Professional Products, as
opposed to Consumer Products.  For a definition of "Professional" vs.
"Consumer" in this context, please see the AAC Licensing FAQ at
www.aac-audio.com/licensing/LicensingFAQ.html Professional products are
typically sold into the media production or distribution infrastructure and
command prices of hundreds to tens of thousands of dollars. In this context,
the AAC royalty rates are in keeping with the expectations of licensees and
the current practices of licensors.
"Shareware software-based AAC rippers" are definitely not Professional
products. The royalties for MPEG-4 AAC encoding are significantly lower than
the royalties for MP3 encoding - dramatically so in the case of PC-based
software encoding where the maximum annual fee is capped in the case of AAC,
and not capped in the case of MP3.
Best Regards,
Andrew Fischer
Director of Business Development, EMD
Dolby Laboratories
100 Potrero Avenue
San Francisco, CA  94103
-----Original Message-----
From: Jim Longo [mailto:jimlongo   mac.com]
Sent: Tuesday, April 02, 2024 4:39 PM
To: Discuss   lists.m4if.org
Subject: [M4IF Discuss] AAC Licensing proposal
Haven't seen any reaction on this list to the announced audio news.  
Although the dreaded usage fees are not contemplated, I am not sure I 
fully understand the language of the royalty structure.
> Under the new license terms, licensees will pay the following royalty 
> rates for MPEG-4 AAC products:
>
> •  For a consumer (non-commercial) decoder product: $0.50 to $0.12 
> (volume-based) per channel
> -  Royalty rates for PC-based software decoder products are $0.25 per 
> channel, up to a maximum annual payment of $25,000 per legal entity

I read this to be FREE products.
This would be all the streaming players wouldn't it.  Does the maximum 
go for both?
What hardware can there be in this category - Free cell phones?
> •  For a consumer (non-commercial) encoder product: $0.50 to $0.12 
> (volume-based) per channel
> -  Royalty rates for PC-based software encoder products are $0.50 to 
> $0.27 per channel (volume-based), up to a maximum annual payment of 
> $250,000 per legal entity

I understand this would be iTunes, etc., That may be  a reasonable 
amount $250,000 for Apple.  Again what hardware devices would be free?
> •  For a professional (commercial) decoder product: $2.00 per channel
> •  For a professional (commercial) encoder product: $20.00 per channel

This seems to me to be high if we are talking about QT Pro, or many 
other commercial software products that are in that price range, but 
probably acceptable for DVD-type players and any recording devices.
If I understand this correctly we won't see many shareware 
software-based AAC rippers.  This is for instance much higher than the 
current mp3 encoder licences isn't it?
> There are no royalties or usage fees for content distribution in AAC 
> format, either in electronic form or in packaged media.

At least this seems a good omen of the current thinking on the subject.
Regards,
Jim Longo
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