Video Compression Players Should ‘Compress’ the Hype

Revised: Jan. 21st
Editors Note: Due to an error in edits, the name ON2 was mentioned in the wrong section of the article. This version corrects the error.

2006 has begun with plenty of excitement in all matters related to digital video: mobile video, IPTV, HDTV, DVR, video-on-demand, and on and on, ad nauseum. It’s as if the entire media industrysuddenly woke up to the fact that digital and IP technologies enable the delivery of video content to virtually any display-laden device. But delivering these new forms of video experience overtoday’s networks means putting incredible pressure on the pipe. Even US cable operators, who spent $100 billion on plant upgrades in the last decade, are looking at ways to boost their efficienciesin order to deliver these new bandwidth-intensive services in a high-quality fashion. Among the options being considered is the use of new video compression technologies.

The appeal of video compression solutions is obvious: operators can deliver more and better quality video services over bandwidth-restricted systems. And, in principle, one would expect that the mostefficient and highest-quality video compression technology would win out in a competitive marketplace. In reality, however, this is unlikely to be the case. As the street literati would say, “In yourdreams!”

I’ll take two angles on this topic, the first being video compression technology itself. Advances in computing power made possible and practical the application of smarter and more complexprocessing, which in turn reduced the amount of information that needs to be transmitted in order to successfully reconstruct video. While it is true that higher compression algorithms existed beforetheir application became practical, today’s technologies have enabled such application.

Today’s video compression landscape continues to be dominated by (pixel block) motion-based compressions such as MPEG1, MPEG2, WMV, and H.264. As more powerful processors become available, futureadvances in compression technology will likely include:

Improvements based on existing principles (that is, MPEG-like in nature);
Novel approaches (for example, wavelets, fractals, and autosophy);
“Intelligent” object identification (for example, game-like picture synthesis); and
Source-channel coding (such as video compression for specific mediums like DSL).
Yes, there is exciting work being done in the video compression space, work driven primarily by the high ROI potential uniquely afforded such solutions: Euclid, Blaze, Qbit (lossless) to name a few.However, the promise of fortune and fame has also led to “snake oil” posturing on the part of many players, some of which are spouting exaggerated and erroneous claims. This is not to say thatvaliant marketing efforts should be confused with puffery, but there is no doubt that the amount of hype surrounding these solutions has created a general mood of skepticism.

A quick guide to evaluating the hype could read as follows:

The significance of improvement in compression ratios is inversely proportional to the credibility of such claims (in other words, the larger the improvement in compression claimed the more likelythe claim is to be bogus);
A press release about a controlled demo does not constitute proof of principle; and
Protecting intellectual property is not a good excuse for avoiding independent testing.
My second angle is fairly straightforward and commonsensical: even the most impressive of innovations is not guaranteed market success. Sadly, success is mostly determined by the product’s relationto relevant business environment and human condition. If there are too many entrenched competitors (even though they offer inferior technologies), or if consumers do not perceive a need for thesolution (even if the engineering team believes otherwise), the chances of market success are minimal.

Video compression technologies that enjoy a strong market presence were created through massive collaboration (that is, standards bodies) or adopted by majority of industry players (that is, achievedconsensus). Neither of these accomplishments comes easy or without significant expense, implying accurately that those best positioned to win out in such efforts are larger, well-funded players whomay not necessarily be pushing the superior technology.

And there are legitimate reasons why this continues to be the case:

Global adoption enables diverse competition and the benefits of commoditization; and
A licensing pool with many participants tends to result in more favorable and reliable licensing deals (as compared to single-technology licensor).
Of course, the ultimate arbiters of new video compression technologies are device manufacturers and content owners, neither of which will risk their rather large revenue base on unproventechnologies. Even if a new compression technology qualifies as “revolutionary,” its adoption would cost its owners a fortune in time and resources to push through the channels. Case in point: it hastaken Microsoft years of effort and hundreds of millions of dollars to get WMV “almost adopted.” (while ON2 hangs to a limited market).

Then, there is question of timing. Large capital investments are already flowing into H.264 and WMV based systems, meaning that investors are highly unlikely to approve a huge write-off in order toswitch to a “somewhat better” solution. In a few years, perhaps, but not today – it just doesn’t make sense.

On the other hand, incremental improvements on existing technologies have a much better chance of success. There is plenty of room for innovation, including improved transmission algorithms, moreefficient encoding, improved scalability, and support for multimedia-based systems (not just video) to name a few. There are plenty of lucrative niches for radically different technologies and small,agile startups – that said, do not expect new video compression solutions to sweep the world overnight.

About The Diffusion Group (TDG) –
The Diffusion Group is a strategic research and consulting firm focused on the new media and digital home markets. Using a unique blend of consumer insights, executive-level consultants, and hands-ontechnical experts, we produce more than just research – we create Intelligence in Action?.

TDG is committed to providing market research and strategic consulting services based on conservative, real-world analysis and forecasts grounded in consumer research.

For more information about The Diffusion Group, visit our website at

The views expressed here are solely those of the author and do not reflect the beliefs of Digital Trends.


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