Streaming Learning Center Where Streaming Professionals Learn to Excel
Related Articles
On August 13, 2026, the 7th Civil Chamber of the Munich I Regional Court issued a 67-page FRAND Guidelines. Although multiple outlets have reported on them, I have not located a public copy of the Guidelines themselves, though I have requested one.
In the Guidelines, the court estimated an top-down monthly per-subscriber royalty of €0.63 for a standard Netflix subscription and €1.05 for a premium one, with Disney+ at €0.49 and €0.84, respectively. Applied mechanically to reported subscriber totals, as I did when the Guidelines were published, those rates would produce annual codec royalties in the billions for a service of Netflix’s size.
These are substantial numbers. Before booking them as an expense, however, remember that the court stated that the figures are explicitly non-binding. The Chamber also noted that existing licensing practice for streaming was insufficiently developed to provide a final number, and stated that the analysis depends on further factual submissions from the parties. This is an illustrative calculation inviting a factual record, not a rate anyone has been ordered to pay.
Despite these caveats, the Guidelines seem to create more questions than they resolve. This article will identify those questions. Before doing so, note that Guidelines themselves are not publicly available. As mentioned, I did request a copy, but though I haven’t heard back, so everything below is gleaned from open-source reporting by JUVE Patent, Knoer, Grünecker, Meissner Bolte and ip fray. Several of the questions I raise may already be answered somewhere in the 67 pages and simply not covered in that reporting.
Before getting started, let’s explore the intent of the Guidelines and the mechanics.
Contents
What is a Top-Down Calculation, Anyway?
For perspective, consider the Guidelines from the perspective of a lawsuit between a patent owner and a service infringing upon that patent. The court is trying to identify a royalty that is Fair, Reasonable, and Non-Discriminatory, or FRAND for the infringed patent.
In determining a FRAND rate, the court first looks at comparable agreements. As stated in Juve Patent, “The guidelines establish a clear hierarchy. Comparable licence agreements are the primary tool for determining a FRAND rate, with the top-down approach serving as a control mechanism.”
When no comparable agreements exist, the court can set the total value of the standard or standards using the top-down methodology. As stated in the Knoer article, “Because the court considers existing licensing practice for streaming platforms insufficiently developed, it proposes a Top-Down calculation methodology for services such as Netflix and Disney+.”
The top-down approach sets the overall value for the standards used by the streaming service. Once set, “The aggregate royalty burden is then allocated according to the SEP holder’s share of the relevant standard.”
Codec economics consulting
You're about to make a seven-figure codec licensing decision. Are you sure you've accurately estimated the EBITDA impact?
Our codec economics service models the EBITDA impact using your ladders, your encoder, your delivery costs, and your royalty exposure. The most accurate estimate you can get.
Learn how it works →So, the top-down number isn’t a royalty that Netflix or Disney would have to pay to any patent owner or pool. Rather, it sets a maximum value from which each patent owner for each technology represented would carve its fair share.
In theory, establishing an aggregate ceiling protects implementers from royalty stacking, ensuring that the sum of individual demands cannot exceed the total economic value of the technology.
On its face, setting that ceiling between €0.49 and €1.05 per subscriber hands patent owners a massive valuation baseline to divide. Of course, this is tough to say without knowing which technologies these numbers include.
Computing the Royalty
Before exploring my questions, let’s review how the court computed the top-down royalty as shown in Figure 1. For a standard Netflix subscription, the court uses one-third of the subscription fee as the royalty calculation base. It then applies an aggregate royalty burden of 16%. Doing the math, one-third of the standard subscription fee × 16% = €0.63 per subscriber per month.
For a premium subscription, the court adds a second component that reflects the additional value associated with higher video quality. It uses one-third of the difference between the standard and premium subscription prices, which the court calculates at €1.68, and applies a 25% aggregate royalty burden. So, €1.68 × 25% = €0.42 per subscriber per month. Add the two to reach the €1.05 royalty for a premium subscriber.
The court applies the same method to Disney+. It calculates €0.49 per month for a standard subscriber and adds a €0.35 premium increment, producing a total aggregate royalty of €0.84 per premium subscriber per month.
With that said, these are the questions I would want answered before applying the Chamber’s figures to any particular service.
What Technologies are Included in the Royalty?
There are multiple technologies involved with streaming video, many of them patented and either included in a pool (codecs – Access Advance VDPP/Avanci, DASH-Avanci) or asserted by an individual patent holder (HDR – InterDigital). Yet in all the articles describing the Guidelines, it’s not clear what technologies are covered.
Knoer describes the royalty calculation as follows. “The court first deducts two-thirds of subscription revenues to account for content costs and attributes the remaining one-third to the underlying streaming technology. It then applies an aggregate royalty burden of 16% and, for premium subscriptions, adds 25% of the premium-price differential.” So, “underlying streaming technology” is the description.
Knoer says the figures “represent the aggregate royalty pool attributable to streaming standards.” JUVE Patent reports that “the chamber calculates indicative monthly licence fees” without saying what those fees cover. Grünecker lists the topic as “streaming-as-a-service, including indicative royalty calculations and patent exhaustion.” Meissner Bolte writes that the Chamber “provides a non-binding illustrative top-down analysis, including observations on subscription-based streaming models.”
The articles reference streaming standards, streaming technology, and streaming as a service. None provides a specific list of patented technologies, standard or otherwise. As you know, streaming includes multiple patented technologies, including audio and video codecs, packaging like DASH, HDR-related technologies and many others. Which are included in the top-down royalty figures?
HDR-related patents illustrate what’s at stake. HDR has its own patents, separate from codecs, and InterDigital’s case against Disney puts HDR at issue. If HDR sits outside the Chamber’s aggregate, a service already exposed on codecs faces HDR demands stacking on top of €1.05. If HDR sits inside it, the codec share of that figure is smaller than the headline suggests, and a codec licensor citing €1.05 is citing a number that includes technology it can’t claim. The same question applies to audio codecs, to delivery formats such as MPEG-DASH, which Avanci Video already bundles alongside the codecs in its own program.
Before we can gauge the reasonableness of the numbers cited by the Munich court, we need to know what technologies they cover.
What Codecs are Included in the Royalty?
Presumably, the Guideline numbers include video codecs, but which? None of the sources I reviewed identified this, which is curious given that Netflix and Disney use a different codec mix. Specifically, Netflix uses H.264, HEVC, VP9, and AV1, which prior to the InterDigital suit, Disney appeared to use only H.264 and HEVC until it was ordered to stop using HEVC.
How can the royalty calculation be the same? There are multiple possible explanations.
Most likely is that the top-down royalty as computed by the court includes any and all available codecs, including LCEVC, EVC, and VVC, and perhaps others. Pools and individual patent owners can claim their respective share from this total.
Using this interpretation, the same calculation works for Disney and Netflix because royalties are charged only on the codecs being used. A VVC patent owner couldn’t sue for its share because the codec isn’t being used so there’s no infringement. Because Netflix uses more codecs, they would pay a larger share of its €1.05 top-down total. Because Disney uses fewer codecs, it would be a lesser share of €0.84.
Under this interpretation, if a streaming service charged the same subscription fees as Netflix but only deployed H.264, the royalty is a fraction of the €1.05. This feels like the most likely option, but even if it is, we don’t know which codecs are included in the top-down calculation.
Alternative 2 is that the €1.05 is the total for whichever codecs the publisher is using. Netflix and Disney are reconcilable under this schema because it doesn’t matter that the codecs are different; the charge is for any used. If a streaming service charged the same subscription fees as Netflix but only deployed H.264, the royalty would be €1.05. This seems far less likely.
However until we know which codecs are included and the mechanics of the allocation, it’s impossible to predict royalties based upon the Munich Guidelines.
Did the Court Treat AV1 and VP9 as Royalty-Bearing?
Another question is how the court considered AV1 and VP9, specifically, whether they are royalty-bearing or not. As of today, that issue has not been fully adjudicated.
Google launched VP9 as royalty-free and the WebM project page still insists that none of the licensees in Sisvel’s VP9 pool “make any contributions to the VP8 or VP9 codecs.” The first feature on the Alliance for Open Media AV1 Features page is “developed under a royalty-free patent policy.”
Patent owners that joined the Sisvel AV1 and VP9 pools, and the Access Advance and Avanci programs, assert that VP9 and AV1 implement techniques covered in their patents. Obviously, the allegedly VP9-related patents are not owned by Google, and the allegedly AV1-related patents are not subject to any royalty-free declarations like those made by Alliance for Open Media (AOM) members.
As of mid-September 2026, no court has ruled that AV1/VP9 are or not royalty free. So, do the Guidelines assume AV1 and VP9 carry patent values like H.264 and HEVC? Or did they assume both codecs are royalty-free in practice? The 16% and 25% aggregate burdens don’t say.
Pick the first assumption and a service running heavy AV1 or VP9 pays for infringement claims that remain unproven. Pick the second and the aggregate understates whatever Sisvel and Dolby eventually establish.
In addition, both VP9 and AV1 will have many patents that are subject to royalty-free declarations, whether by Google or AOM members. How did this impact the overall top-down number, and how will this impact the share of the top-down total allocated to these codecs?
Does the Royalty Track Deployment or Price?
Another, more obscure, but still important issue relates to whether royalties will be charged for subscription classes that don’t consume a particular codec. As an example, the Access Advance pool doesn’t charge a royalty for subscription classes that can’t receive a covered codec. So, if a standard subscriber only consumes H.264, with HEVC or AV1 reserved for a premium tier, the streaming service would only pay royalties on subscribers or revenue in the premium tier. This allows a streamer to deploy an advanced codec where it unlocks additional revenue, but not on tiers where the bandwidth savings are limited by the resolution delivered.
A key unresolved issue is whether the Chamber would tie any aggregate allocation to actual delivery of a particular standard to a subscriber or tier, or instead use subscription-tier revenue as a proxy for service-wide use. The publicly reported methodology uses subscription revenue and premium pricing; it does not disclose a codec-by-codec deployment rule.
It seems likely that courts will only apply a royalty on users that actually consume that codec. That is, no patent owner can collect a royalty without an infringing use. Serve a standard subscriber H.264 only, and no HEVC patent gets practiced against that subscriber, so no HEVC royalty attaches, whatever the top-down math implies on paper.
For a patent-specific infringement claim, the patentee would need to establish the relevant acts of use and infringement. Whether a portfolio licence or top-down allocation is assessed tier by tier is a separate question.
That makes Munich’s number a ceiling bounded by actual technology use, the same constraint that already governs Access Advance’s model. The two get there through different arithmetic, but neither can charge for a codec nobody delivered.
In Closing
Overall, the court precisely defined the mechanics of the top-down royalty computation without identifying the covered components. Perhaps this is addressed in the 67 page document but not in any interpretive articles. If not addressed, however well intentioned, the Guidelines don’t provide sufficient details for any practitioner to estimate royalties for any streaming service.
Until courts or licensors define the specific standards and allocation mechanics behind these top-down figures, streaming executives cannot rely on headline court estimates to budget licensing risk. Accurately modeling codec ROI and potential royalty exposure requires evaluating your actual encoding ladder, viewing distribution, and device delivery tier by tier, separating the standards you actively practice from the aggregate ceilings floated in litigation.
If your organization is evaluating the economic impact, tier pricing, and royalty exposure of deploying HEVC, AV1, or VVC across your encoding ladders, learn more about our Codec Economics and Royalty Analysis service or contact me at jan.ozer@streaminglearningcenter.com to schedule an introductory call.
