Ericsson, InterDigital, Futurewei: Content streaming SEPs are ‘hot’ right now

Licensing leads from Ericsson, InterDigital, and Futurewei shared insights on sealing deals in the fragmented SEP market at the TPN conference, reports Marisa Woutersen.

Content streaming is the next big area of monetisation in standard essential patent (SEP) licensing, according to tech experts from InterDigital, Ericsson, and Futurewei, who spoke during a panel at TPN North America this week.

Thomas Choi, senior director of licensing at Ericsson alluded to InterDigital’s recent announcement projecting an additional $300 billion in licensing revenue from this area alone.

“[Streaming] will actually match the size of the smartphone market by 2027 so it’s a very substantial market,” he said.

Shubha Luthra, director, licensing at InterDigital, agreed, pointing to the large growth in consumer demand for video content.

“Think of how much more video you, as a consumer, consume on a daily basis compared to just five years ago—that trend is only projected to increase further and further,” she said.

The panel, “Dealmaking in the evolving SEP market”, also included Cloris Cui, senior IP counsel from Futurewei, and was moderated by Ryan Richardson, partner from Sterne Kessler.

Looking ahead

Choi noted the increasing fragmentation within the space, with companies exploring various licensing approaches.

“There are a lot of big players and they are all utilising coded technology, and we’re primarily talking about video,” he explained.

He highlighted that several pools are emerging: with some focused on Volatile Organic Compounds video, and Access Advance handling content streaming.

There are also other groups trying to form pools and agree joint licensing efforts, alongside the pursuit of bilateral agreements by companies such as Nokia.

“So right now, you have a situation where there is a lot of activity,” he added.

Describing the “hot” situation as a “trial and error” phase, he suggested that it may take a while before the industry settles on a dominant licensing model, depending on whether it is a pooled or bilateral approach.

“It's not clear which way is going to be the path most companies end up pursuing,” Choi added.

Luthra noted that, as both devices and content become more sophisticated, the demand for SEP-licensed technologies, especially video codecs, will only increase.

“It's the natural cycle of the standards that will just play out in the video Codex space as well,” she explained.

Tailored strategies for different sectors

So while this seems to be the direction the industry is moving in, Cui pointed out the differences in licensing strategies between this sector and more traditional markets such as smartphones or automotive.

She urged the audience to always do marketing intelligence and analysis to gain a comprehensive understanding of the industry.

For example, comparing the internet of things (IoT) to video streaming, Cui highlighted that “these are two completely different industries”. The latter is a "very concentrated industry" with “deep-pocketed” players, making it more sophisticated in terms of licensing.

“The knowledge base is completely different,” she said, noting that licensing experts must tailor their strategies to the different characteristics of each sector.

Luthra believed that it is important to communicate the value of a patent portfolio effectively, depending on the audience.

“Maybe the messaging has to be changed a little bit,” Luthra said, stressing that understanding the business model of each licensee and highlighting where patents can add value remains critical. It just has to be customised to the audience.”

For Choi, one of the biggest challenges in the streaming space is the lack of experience some licensees have with SEP negotiations.

“The licensees might not have as sophisticated of an IP department... so there's a bit of a learning curve,” he explained.

Additionally, there is no “one-size-fits-all” model for licensing, as different companies may prefer various structures, such as fixed fees or per-subscriber agreements.

Choi acknowledged the challenges but remained optimistic, saying: “Once you overcome a lot of those hurdles, hopefully, licensing will become a lot more efficient, whether it's through the pool model or bilateral.”

Fragmented licensing pools

So what challenges are companies facing when entering into licensing agreements in emerging sectors such as content streaming and IoT with these multiple pools?

Choi acknowledged the pressure that this fragmentation creates for licensees, as they are frequently approached by multiple licensors—each claiming to offer the best solution.

“It's important to understand that the licensee is getting knocked on the door by tons and tons of companies,” he explained.

“There's only a certain finite amount of money for licensing,” Choi said, emphasising that as a result a lot of relationship-building, trust and education goes into sealing the deal.

“It's important, as a licensor, that our portfolio stands out from a quality perspective. We need to demonstrate this through claim charts, showing the pedigree, and make the case for the licensee to go to their C-suite and argue that this is a portfolio worth taking a licence to,” he added.

The field is not a “one-stop-shop” which can complicate negotiations, so standing out in terms of portfolio and building that relationship is key.

Cui suggested that the existence of multiple pools could be beneficial for licensees, as it promotes competition and allows companies to gather more information before making a decision.

"Especially for new technologies like streaming, at an early stage, you need this competition... so that the licensees can talk with different pool administrators," Cui said.

This competition, according to Cui, is a sign of health in the industry and gives licensees more options but licensees need risk management strategies.

Understanding motivations

“Trust building is really important,” Luthra said, noting that the first step is ensuring that the right licensing executives approach the correct individuals within the target company.

She emphasised the need to be “cognisant of the situation that the licensees themselves are in," particularly when market forces like content aggregation are putting additional pressure on businesses to retain subscribers.

Luthra advised that this information should be presented in a way that can be digested within a brief one-to-two-hour meeting, allowing the licensee to easily share information with their internal stakeholders.

In addition, Luthra recommended highlighting the strength of the licensor’s patent portfolio early in the process.

“Having third parties benchmark your portfolio, highlighting that quality and the quantity of the portfolio independently, are really good pieces of information to share as soon as possible,” she added.

Thomas Choi added that cultural factors can also play a significant role—especially in the global IT and streaming industries.

“There are certain geographic areas where multiple licensees are very competitive with one another,” he explained.

In these regions, securing a deal with one company could encourage competitors to follow.

For Cui, understanding the licensee’s motivation is important during negotiations.

“I always try to figure out what motivated the other side to close the deal with me,” Cui shared, though acknowledging that it can be difficult to uncover the true drivers behind a company's decisions.

For some, the goal may be managing risk, while others might want to establish a comparable deal for future negotiations.

“At the end of the day, as long as both sides close the deal without going to litigation...that actually saves both sides a ton of money,” Cui said.

New industries

There are also considerations to take into account for specific sectors when licensors are approaching newer industries, eg, media codecs and smartphone licensing.

Unlike in the smartphone market—where 5G compliance requires the use of a single, fixed technology—streaming services may dynamically switch between different codecs based on network conditions.

This variability makes it harder for licensors to convince licensees of how frequently their technologies are being used, which can affect later negotiations on royalty rates.

Luthra highlighted another challenge specific to video streaming: the widespread belief that certain open-source codecs, like AV1 and VP9, are free of patent restrictions.

“From one perspective, it's true, but there might still be patents covering the technology that is deployed as part of those codecs,” Luthra explained.

This adds an additional layer of complexity because licensors must educate potential licensees who may not understand why they need to pay for technologies they believe are free.

In terms of market structure, Choi stressed that education and trust are key due to the sheer number of players involved in the content streaming space compared to smartphones.

“In the smartphone space, you have essentially a handful of players that make up [more than] 90% of the market,” Choi said, whereas the content streaming market is much more fragmented, with up to 60 companies competing.

This fragmentation requires a more flexible approach to licensing, with different pricing models and engagement strategies for each company.

“Every company is going to require flexibility in terms of how you engage,” he concluded.

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