Ericsson Adds Multimedia Patents to Avanci Video Unifying Streaming Technology Licensing
Ericsson’s Licensing Pivot Signals a Seismic Shift in Streaming Tech Monetization
As Ericsson Joins Avanci Video, Investors and Industry Watch a Consolidation Wave Take Shape in the Patent Licensing Arena
On a quiet Tuesday in April, amid the unrelenting hum of global digital streaming, a subtle but potentially seismic shift occurred. Ericsson, a name synonymous with telecom infrastructure, made a strategic move that could reverberate across the technology and media landscapes for years to come: it joined Avanci Video as a licensor.
While the headline might seem narrow—another intellectual property portfolio added to a growing patent pool—the implications are anything but. Ericsson’s decision reflects a deeper reorientation of business models in both telecommunications and streaming technology, pointing to an emerging era where intellectual property monetization may rival hardware in revenue importance.
And for the multi-billion-dollar over-the-top (OTT) streaming market, the timing could not be more pivotal.
“One-Stop Licensing” Goes from Theory to Reality
Ericsson Bets Big on Simplifying a Fractured Patent Landscape
Avanci Video, positioned as a “one-stop patent licensing solution for internet streaming,” now boasts a portfolio of 32 licensors and counting. It consolidates licensing rights for essential video technologies—AV1, H.265, H.266 (VVC), MPEG-DASH, VP9—into a single agreement. This eliminates the historically complex, costly process of negotiating separate deals with each patent holder.
A patent pool is an agreement where multiple patent owners license their patents collectively as a single package. This simplifies access to essential intellectual property, allowing companies needing to use the technology to obtain necessary licenses from one source rather than negotiating individually.
Ericsson’s decision to contribute its multimedia technology patents to this pool is seen by many as a catalyst moment. The company has invested decades in video codec innovation, and its portfolio is considered among the most valuable in the multimedia sector.
“Fragmentation in patent licensing has long been a drag on innovation,” said one industry strategist. “By consolidating through Avanci, Ericsson is not just licensing technology—it’s licensing speed, clarity, and scalability.”
Streaming companies, burdened by rising content costs and user churn, are hungry for such clarity.
Strategic Timing Amid Financial Realignment
Ericsson’s Financial Fortitude Backs Its Diversification Play
The move comes on the heels of a year of disciplined financial execution for Ericsson. The Swedish telecom giant posted strong adjusted operating margins in Q4 2024—46.3% in its Networks segment—and reported robust free cash flow despite ongoing restructuring.
Ericsson's Adjusted Operating Margin Trend Over Recent Quarters/Years
| Period | Adjusted Operating Margin (Excl. Restructuring) | Note |
|---|---|---|
| Q4 2024 | 13.2% | Adjusted Operating Profit was SEK 9.6 billion. |
| Q3 2024 | 11.8% | Adjusted Operating Profit was SEK 7.3 billion. |
| Full Year 2024 | 3.8% | Adjusted EBIT margin (comparable to adjusted operating margin). |
| Full Year 2023 | -5.2% | Adjusted EBIT margin. |
| While revenue growth was modest, the company’s focus on high-margin North American markets and improvements in supply chain management underpinned operational stability. But a closer read of its strategic trajectory reveals deeper motives behind the licensing pivot. |
By joining Avanci Video, Ericsson positions itself to stabilize earnings via recurring IP licensing revenue, hedging against the inherently cyclical nature of infrastructure contracts.
“Infrastructure CAPEX is lumpy. Licensing royalties aren’t,” said one analyst familiar with the company’s strategy. “This is about smoothing the ride, especially when macro winds get choppy.”
Indeed, potential tariff risks in the U.S. and economic volatility in emerging markets like India add pressure to diversify income streams.
The Codec Conundrum: Streaming’s Hidden Bottleneck
Why Simplified Licensing Matters More Than Ever
Behind every high-definition stream lies a thicket of patents and technical standards—codecs like AV1 and VVC (H.266), which enable high-efficiency compression. These technologies are vital as platforms strive to balance user demand for video quality with constraints on bandwidth and environmental sustainability.
Did you know that video codecs play a crucial role in making digital video files manageable? These algorithms compress and decompress video data, allowing for efficient storage and transmission. By removing unnecessary data, codecs like H.264 and H.265 reduce file sizes while maintaining quality, making them ideal for streaming platforms and devices. Interestingly, codecs work in tandem with container formats like MP4 to ensure compatibility across devices. Whether it's streaming your favorite show or editing professional footage, video codecs are the unsung heroes behind the scenes, ensuring that video content reaches you in the best possible quality without overwhelming your internet connection or storage space.
But adoption has been slow. One reason? The sheer legal complexity of securing rights to use these standards.
Table: Comparison of Compression Efficiency and Features of Major Video Codecs
| Codec | Compression Efficiency | File Size Reduction | Quality at Low Bitrates | Processing Requirements | Ideal Use Cases |
|---|---|---|---|---|---|
| H.264 (AVC) | Moderate; widely supported | Larger file sizes vs newer codecs | Good for SD/HD video | Low computational requirements | Legacy devices; standard-definition streaming |
| H.265 (HEVC) | Up to 50% better than H.264 | Smaller file sizes; optimized for 4K/8K | High-quality video at lower bitrates | Higher computational demands | 4K/8K streaming; limited bandwidth scenarios |
| VP9 | Comparable to H.265; open-source | Similar file size reduction as H.265 | Good quality with efficient compression | Moderate computational requirements | Web-based streaming (e.g., YouTube); royalty-free use cases |
| AV1 | 30-50% better than H.264; surpasses VP9/HEVC | Most efficient codec currently available | Excellent quality at ultra-low bitrates | Very high computational demands | Streaming platforms (Netflix, YouTube); mobile devices; royalty-free applications |
| VVC (H.266) | Higher efficiency than HEVC; similar to AV1 | Significant file size reduction for high-resolution videos | Exceptional quality at low bitrates | Extremely high computational demands | Future-proofing for 8K/360° video; advanced networks like 5G |
“Every codec improvement brings real savings in bandwidth and carbon footprint,” said a technical advisor to a global streaming firm. “But the licensing uncertainty makes it hard to commit, especially for newer platforms.”
This is where Avanci Video changes the equation. By bundling major codecs into one accessible license, and now with Ericsson’s patents in the mix, the platform lowers barriers to next-gen codec adoption.
The streaming industry—which spans behemoths like Netflix and regional players trying to scale—could soon find itself in a new, more predictable licensing paradigm.
Competitive Reverberations: Who’s Next to Join?
Ericsson’s Move May Pressure Others to Consolidate or Compete
In industry terms, Ericsson’s entry into Avanci Video may trigger what analysts are calling a “follow-the-leader effect.”
Patent-heavy firms like Nokia, Qualcomm, InterDigital, and others may now face a strategic decision: join the pool and share royalties—or stay independent and risk being left out of the ecosystem driving standard adoption.
Meanwhile, streaming providers—some of whom have clashed with licensors over FRAND (Fair, Reasonable and Non-Discriminatory) licensing terms—may be incentivized to embrace pool licensing as a cost-control mechanism in an increasingly price-sensitive market.
FRAND stands for Fair, Reasonable, and Non-Discriminatory, representing the terms under which holders of Standard Essential Patents (SEPs) must offer licenses. This obligation ensures that patents necessary for a specific technology standard are accessible to implementers on equitable grounds.
Still, centralized licensing isn’t without its detractors. Regulatory scrutiny from the European Commission and U.S. antitrust authorities has loomed large over prior licensing models, and critics warn that consolidation could stifle competition or skew pricing.
But others see the convergence as overdue.
“If done transparently, a unified model could help the entire industry evolve faster,” said a regulatory consultant who has advised on telecom mergers.
Implications for Investors: The Birth of a New Cash Flow Engine?
A Paradigm Shift in Ericsson’s Valuation Model?
For investors, Ericsson’s licensing strategy signals a fundamental shift in how the company might be valued going forward.
Recurring royalty revenues are typically accorded higher valuation multiples than cyclical hardware sales, due to their predictability. If Avanci Video scales successfully—with Ericsson’s contribution making it more attractive to both licensors and licensees—it could become a cornerstone of the company’s financial model.
Comparison of Recurring Revenue Models and Cyclical Hardware Sales: Factors Influencing Valuation Multiples
| Factor | Recurring Revenue Models (e.g., SaaS) | Cyclical Hardware Sales |
|---|---|---|
| Revenue Predictability | High (subscription-based, predictable cash flow) | Low (dependent on market cycles) |
| Growth Potential | High (scalable with low marginal costs) | Moderate (linked to product innovation cycles) |
| Risk Level | Low (recurring income reduces reliance on new sales) | High (subject to demand fluctuations and competition) |
| Valuation Multiples | 5x–10x ARR for private SaaS; 7x–15x ARR for public SaaS | 1x–3x revenue or lower during downturns |
| Investor Preference | Strong (focus on long-term growth and stability) | Moderate to weak (cyclical risks deter investors) |
“Don’t underestimate the impact of even a few hundred million euros in steady licensing income,” one institutional investor noted. “It reshapes how you model risk and return, especially in this interest-rate environment.”
Moreover, Ericsson’s leadership in video technologies enhances its leverage in future licensing negotiations—be it with streaming companies, chipset makers, or even next-gen immersive media platforms.
A Broader Lens: Codec Wars, Green Streaming, and Global Media Dynamics
The Bigger Picture Behind the Licensing News
The story here goes beyond Ericsson or even Avanci. It touches on how the global digital media ecosystem evolves.
- Green Streaming: AV1 and VVC offer up to 50% better compression than legacy codecs, which means lower bandwidth and energy use. Licensing simplification accelerates their adoption, aligning with climate-conscious initiatives.
Streaming online video consumes significant energy, primarily for data transmission and processing across networks and data centers. This energy usage contributes to a carbon footprint, representing a notable environmental impact associated with our digital entertainment habits.
- Global Expansion: As streaming pushes deeper into mobile-first markets, the need for efficient video delivery on constrained networks will grow. Licensing complexity has held this back. That dam may now be breaking.
- Edge Use Cases: From AR/VR to ultra-low latency livestreams, next-gen codecs are foundational. A simpler licensing regime could catalyze innovation in these edge cases.
In short, centralized licensing isn’t just an IP strategy—it’s a deployment strategy for the entire media tech stack.
A Calculated Gamble That Could Redefine the Game
Ericsson’s entry into Avanci Video may appear, at first glance, like a subtle licensing maneuver. In reality, it represents a strategic inflection point—both for the company and for the broader streaming and media technology ecosystem.
The move adds immediate heft to Avanci Video, potentially accelerating the adoption of next-gen codecs while reducing litigation risks and regulatory ambiguity. For Ericsson, it paves a new revenue path that is diversified, defensible, and increasingly aligned with the digital economy's trajectory.
Of course, challenges remain: regulatory oversight, competitive maneuvering, and execution risk in standardizing fee structures. But the direction is clear—and the market will be watching.
In the coming quarters, investors, licensors, and streaming giants alike will be parsing one question:
Is this the moment that IP licensing finally becomes the quiet engine driving the future of video?