The Codec Licensing Shift: Why AV1’s “Royalty-Free” Era Is Effectively Over
Category: Streaming & Broadcast Technology Slug: /av1-codec-licensing-royalty-free-over
For the better part of five years, one of the strongest arguments for deploying AV1 was the claim that it was royalty-free. That claim was never entirely accurate, but in 2025 it became something closer to financially irresponsible to plan around.
The convergence of new patent pools, high-profile enforcement actions, and a fundamental shift in how codec intellectual property is monetised means that any streaming organisation deploying advanced codecs — whether AV1, HEVC, or VVC — now faces a licensing landscape that demands attention from legal and finance teams, not just engineering.
What Changed in 2025
Three developments reshaped the codec licensing environment in ways that affect every publisher operating above a certain scale.
First, Access Advance launched its Video Distribution Patent (VDP) Pool in January 2025, covering content distribution using HEVC, VVC, AV1, and VP9. This was not a device-side licensing programme — it targets the act of encoding and delivering content itself. Royalty rates, published in July 2025, are calculated based on whichever is highest among three metrics: average monthly active video users, average monthly video subscribers, or semi-annual streaming revenue.
Second, Sisvel announced that its AV1 patent pool had licensed roughly 50% of the finished-product AV1 hardware device market — covering TVs, set-top boxes, and other consumer hardware. For a codec launched under the banner of royalty-free, having half the device market paying licensing fees fundamentally undermines that positioning.
Third, Nokia and Amazon settled a global patent dispute that included content-side royalties for H.264 and H.265 usage across Prime Video, Freevee, and Twitch. This was one of the first confirmed settlements where a tier-1 streaming service paid for the act of distributing codec-encoded content, not just for the hardware decoding it. The message to the industry was unmistakable: if Amazon can be compelled to settle, no major service is immune.
The New Licensing Landscape at a Glance
Understanding who is charging what, and for which codecs, requires tracking multiple overlapping programmes. The table below summarises the current state of the major content-side and device-side licensing pools:
| Programme | Codecs Covered | Licensing Type | Notable Detail |
|---|---|---|---|
| Access Advance VDP Pool | HEVC, VVC, AV1, VP9 | Content distribution | Annual cap + de minimis waiver for small services |
| Avanci Video Pool | HEVC, AV1 | Content distribution | No cap or de minimis exception announced |
| Sisvel AV1 Pool | AV1 | Device licensing | ~50% of AV1 hardware market licensed |
| Access Advance / VCL Advance | HEVC, VVC | Device licensing | Consolidated from Via LA acquisition |
| Individual patent holders | H.264, HEVC, AV1, streaming | Direct enforcement | Nokia, InterDigital, Broadcom actively pursuing claims |
What makes this landscape particularly complex is the overlap between programmes. Sixteen licensors are common to both Access Advance’s VDP Pool and Avanci’s Video Pool, which means licensees paying into both receive an offset for double royalties — but the exact offset is not publicly disclosed, making cost modelling difficult without direct engagement.
The Break-Even Math Has Changed
Before content-side licensing became enforceable, the economic case for deploying AV1 or HEVC beyond H.264 was relatively straightforward: spend more on encoding compute to save on CDN bandwidth. A 30% bitrate reduction over H.264 translated directly into CDN cost savings, with the only incremental cost being encoder complexity.
That equation has fundamentally shifted. For services above the VDP Pool thresholds, the calculation now includes encoding compute, potential content-side royalties that can reach into eight figures annually for the largest services, and the possibility of direct patent enforcement from individual holders.
Meanwhile, CDN costs have declined significantly since 2019 when these efficiency arguments were first being made. The bandwidth savings from deploying AV1 over H.264 are real, but the dollar value of those savings per gigabyte delivered is substantially lower than it was five years ago.
For services delivering HDR and 4K premium content, the codec choice remains operationally necessary — AV1 and HEVC provide capabilities that H.264 simply cannot match at those quality tiers. The royalty costs become a necessary cost of doing business. But for FAST services, ad-supported platforms, and others working primarily with 8-bit 1080p content, the efficiency argument that justified advanced codec deployment now requires a much more careful financial analysis.
Where AV1 Stands Despite the Licensing Questions
None of this means AV1 adoption is slowing. The opposite is true.
Netflix recently reported that AV1 powers roughly 30% of its streams and has expanded into HDR delivery, achieving feature parity with HEVC. On the device side, Netflix noted that 88% of large-screen devices submitted for certification between 2021 and 2025 supported AV1, with the vast majority offering full 4K at 60fps capability.
Browser support has been near-universal since AV1’s early days. Mobile remains the one platform where hardware decode lags significantly behind HEVC, though the Alliance for Open Media’s investment in the dav1d software decoder has enabled efficient AV1 playback on Android devices without dedicated hardware.
The codec itself has reached critical mass. The question is no longer whether AV1 works or whether devices support it. The question is what it costs to use it, and whether the organisations deploying it have adequately accounted for that cost.
What Comes Next: AV2 and the IP Question
The Alliance for Open Media finalised the AV2 specification in late 2025. Early testing shows compression efficiency gains in the high-20% to mid-30% range over AV1, potentially closing much of the gap with VVC.
But the more consequential signal came from InterDigital’s acquisition of AI-native compression startup Deep Render in October 2025. InterDigital — a non-practicing entity with an $8 billion market cap built on licensing codec and wireless IP — explicitly framed the acquisition as positioning for “the next generations of video technologies.” If AI-native compression techniques are being accumulated by the same organisations that monetised H.264, HEVC, and VVC, the post-AV2 generation is unlikely to reset the royalty conversation.
For publishers planning their codec roadmaps, the implication is clear: the era of assuming any advanced codec is royalty-free is over. The practical question has shifted from “can we avoid paying for codecs?” to “which codecs are worth paying for, at what scale, and with what financial provisions in place?”
That is a healthier question. It just requires different people in the room when it is being answered.