The 8K-angle on Faultline’s 2030 Codec Forecast

Last week Faultline published their Media & Entertainment Transcoding Workload and Device Royalty Forecast for the decade ahead. We thought its 8K implications were worthy of your consideration.

Their analysis and forecasts are particularly bullish on VVC.

We asked Alex Davies, one of the report’s authors, for some more 8K context. He told us that “one of the main arguments in favor of VVC is of course its suitability for 8K resolutions. However, consumer demand for 8K devices is unclear at best. In the same way that lessons can be learned for VVC’s adoption by looking at its predecessor HEVC, the arrival of 8K devices should take heed of the marketing confusion that emerged when the terms “UHD” and “4K” were used as if they were interchangeable. The broadcast world seems closer to 8K than OTT, and to this end, we would expect the MPEG ecosystem to be a more fervent supporter of 8K than the AOMedia ecosystem.”

Faultline has created a timeline customarily reserved for their paying subscribers, which they kindly let us offer to 8K Monitor readers.

https://rethinkresearch.biz/wp-content/uploads/2021/04/Timeline-d9325.pdf

Forecasts

He also shared some snippets from the reports forecast section.

[p.31 –] “When we split these Global results into regions, two main camps appear, as we look at the curves of our graphs. The two most developed regions – North America and Europe – can collect much higher device royalties for VVC relative to their population. Market demand for expensive 8K devices is set to be more assertive in these regions. Of course, there are other use cases for VVC – such as AR and VR – but we anticipate these will not be the primary driver of deployment in total consumer electronics.

And while Japan, South Korea, Taiwan, and part of China will see equal, if not greater, demand for 8K than North America and Europe, these countries will be dwarfed by the vast majority of APAC, which is less wealthy. APAC, MENA, and Latin America will start off 2023 with a smaller TAM for VVC royalties relative to their population, as it will take longer for 8K devices to establish a footprint among lower-tier electronics.”

[p.34 – ] “Just as we used North America as the in-depth example of one trend – VVC surpassing HEVC before the period’s end – we shall use APAC for the other clear pattern in the forecast. In all developing regions, VVC is breathing down the neck of HEVC by the end of the period but has still not quite surpassed it in terms of royalty revenue. As outlined in the introduction of this Regional Device Royalty section, this is largely due to much slower demand for 8K devices in these regions.”

Vendor Discussions

Alex also picked out some 8K-specific discussions with vendors for us.

[p.48 – ]”Many interviewees to make observations on the application of each codec, arguing that the market would become a rough dichotomy. HEVC and VVC were generally said to be the choice for the ‘larger screen’ – CTV, broadcast, and set-tops – and premium content, at least in part due to their respective 4K and 8K capabilities. Naturally, some of the HEVC patent pools we spoke to disputed this limited categorization and noted its ubiquitous presence in all-new mobile handsets. Still, nonetheless, this ‘big screen’ perception was widespread. EVC and LCEVC were sometimes placed into this camp, too.”

[p.50 –] “Some expressed scepticism at the consumer demand for 8K in the foreseeable future and therefore questioned whether VVC was to follow a similar trajectory to HEVC in the media and entertainment market.”

China and VVC

We then asked Alex how he saw VVC penetrating China vs. the local AVS3. “China is a mixed bag, but we expect VVC to follow on a similar initial trajectory to HEVC. It should enjoy more success than HEVC in time, but this current study chose not to examine the Chinese/niche codecs themselves. Future work hopes to do that. Our next visit to the transcoding market will look to work out the service revenues.”

At the 8K Monitor, we are less confident that China and maybe other parts of Asia-Pacific will adopt these new codecs significantly. China’s domestic codecs will likely dominate their market not allowing HEVC, VVC or alternatives to gain much of a foothold.

A word on royalties

Finally, we asked Alex how he saw the royalty concerns for the VVC playout.

“For playout, I don’t think royalties on the equipment/hardware/platform are a concern. Playout itself will have to move when its customers start demanding it, which brings us to that eternal chicken-or-the-egg question. There will be a tipping point where people start pulling the trigger.”

We think Faultline has minimized the royalty issues.  HEVC did not see the wide adoption many though because of the overlapping patent pools, fees, and uncertainty of licensing, Such uncertainty is likely to extend to VVC unless there is a radical change in the patent licensing process.  And, challenges to the royalty-free AV1 codec have emerged with Sisvel now suggesting some ABU patents need to be licensed.  Uncertainty is the real threat in new codec rollout even if consumers should demand them – in our opinion.

The full Faultline report and forecast only available to paying customers here.