Video Compression: An Examination of the Concepts, Standards, Benefits, and Economics

ITEC620 April 14, 2008
To accommodate the increased demand for digital video content, compression technology must be used. This paper examines the most commonly used compression formats, the MPEG-1, MPEG-2 and MPEG-4 video compression formats, their relative benefits and differences, the delivery methods available for digital video content and the economics of video content delivery. Every time a digital video disc is played, a video is watched on YouTube, an NFL clip is viewed on a Sprint-based cellular phone, or a movie is ordered through an on-demand cable television video service, the viewer is watching data that is not in the state it which it originated. Video in an unmodified state is comprised of vast quantities of data (Apostopoulos & Wee, 2000). In order to make effective and efficient usage of video data, some method of reducing the quantity of data is necessary. Apostopoulos and Wee, in their 2000 paper, “Video Compression Standards” explain this succinctly and well, “For example, consider the problem of video transmission within high-definition television (HDTV). A popular HDTV video format is progressively scanned 720x1280 pixels/frame, 60 frames/s video signal, with 24-bits/pixel (8 bits for red, green, and blue), which corresponds to a raw data rate of about 1.3 Gbits/sec. Modern digital communication systems can only transmit approximately 20 Mb/s in the 6MHz bandwidth allocated for each terrestrial (over-the-air) television broadcast channel. Therefore, powerful video compression techniques are applied to compress the video by a factor of about 70 in order to send the video, with a raw data rate of 1.3 Gb/s, through the available 20 Mb/s channel (as well as to save some bits for the audio and other data to be transmitted) (Apostopoulos & Wee).” Video transmission is subject too bandwidth, delay, and loss requirements (Wu, Hou, Zhu, Zhang & Peha, 2001) A solution to this quandary is video compression, which provides two primary benefits: (1) the elimination of the bandwidth and storage capacity bottlenecks that are inherent in content distribution, and (2) the enabling of video content distribution through applications such as the digital video disc (DVD) player (both standard and high-definition (HD)), video conferencing, high-definition television (HDTV), and internet protocol television (IPTV) (Apostopoulos & Wee). Without compression, it would be nearly impossible to transmit or store data due to the high costs associated with securing the vast amounts of bandwidth or storage capacity associated with uncompressed video data. Storage capacity becomes particularly relevant when examining applications such as DVDs, which require entire video programs to be stored on single pieces of media, in this case the digital video disc. Bandwidth constraints become apparent when data that is traversing the network leaves the “backbone” and enters the “last mile” of applications such as IPTV, where the bandwidth capacity shrinks considerably. Through video compression and its associated video compression algorithms, video can be transmitted and stored using less bandwidth and storage space. Video compression, in its most basic form, is the compression of sequenced still images. To explore the inner workings of video compression, one must first examine still image compression. The limits of the human eye make video compression possible. Video compression is based on two underlying concepts. First, large image features, those in the low frequencies, are more perceptible to the human eye than small image features, those in the high frequencies (BDTI, 2007). Second, the human eye is more sensitive to luminance, or brightness, than to chrominance, or color (BDTI). As a result, images can be compressed – that is, detail can be almost unnoticeably deleted – by removing small detail while retaining large detail (nose versus facial pores) and by reducing the density of color when brightness is increased. In order to conduct a nuanced analysis of the economic issues affecting video content delivery, it is necessary to understand the current and forthcoming video standards. Prior to this consideration, there are several key concepts that must be examined. A brief and basic discussion of these concepts follows.

VIDEO COMPRESSION CONCEPTS

Intraframe v. Interframe. Two techniques are used by the different video compression methods: (1) intraframe, in which compression occurs within a singular video image or frame, and (2) interframe, in which compression reduces the temporal redundancies, where pixels in two sequenced video frames have the same values in the same location. Interframe video compression formats are typically more efficient, from both a bandwidth and storage perspective, and therefore are preferred by content distributors. Intraframe video compression offers significantly more editing capabilities because each frame is self-contained; therefore, this method is preferred by digital content developers and creators (Sauer, 2006). Interlaced v. Progressive Scan. Two different display systems exist for the presentation of video: interlaced and non-interlaced. As mentioned earlier, video consists of sequenced images or frames. The number of frames displayed per second is known as the frame rate and is represented by the abbreviation fps. Frame rates differ between the US, with a frame rate of 30fps, and Europe, with a frame rate of 25fps. Most video displays refresh an image once every frame, so all of the lines of a frame are scanned at the same time. This is known as a non-interlaced or progressive scan display. Television, on the other hand, displays video as fields, or half frames. One field contains the odd-numbered horizontal lines in a frame and the other field contains the even-numbered horizontal lines in a frame. Television must update its display twice to produce a frame. Therefore, each frame contains two fields from differing points in time, resulting in a display rate of 60 fields per second (Tudor, 1995). This display is known as an interlaced display. Lossy v. Lossless. Two different classes exist for video compression codecs: Lossy and Lossless. Lossless video compression, there is no data lost when the data is compressed. All of the data remains after compression and decompression. Video can be compressed over and over and no data will be lost, regardless of the number of times it is compressed. Lossless video compression enables the exact reconstruction of the original video from the compressed video. In lossy compression some data is lost by the compression algorithm, and so perfect image reconstruction from the compressed data cannot be achieved. Lossy compression algorithms seek to reduce bit stream size while minimizing the data lost during compression in order to reduce the perceptibility of the differences between the uncompressed original image and the reconstructed image. A drawback to lossy compression is that every time the compression algorithm is run, more data is lost, and the image differences become more visible to the human eye. Chrominance v. Luminance. Tto understand chrominance and luminance, the basics of the method by which color is displayed in an image must be understood. Color images contain three color planes: the red, green, and blue. Each color plane is a single color representation of the image. By overlaying and mixing color planes, a full color image is displayed. During the compression of a colored image, each color plane is subjected to the compression algorithms (BDTI, 2007). Similar to still images, video contains three planes, but after this is where the similarity ends. Video’s color scheme is made up of one plane that contains the brightness of each pixel that makes up the image (or luminance) and two planes of color information (or chrominance). The specific levels of the red, green, and blue components of each image pixel are defined by combining luminance and chrominance (BDTI), and in this way the full color video is visible. Due to the limits of the human eye and its sensitivity to luminance, chrominance planes are stored with lower resolution than luminance planes thereby allowing a reduction in the size of an image while maintaining a frame that is virtually indistinguishable, to the viewer, from the original frame. Chrominance planes are typically encoded using half the horizontal and vertical planes as the luminance plane. That is, the luminance plane in a typical video frame is broken down into 16-pixel by 16-pixel blocks, whereas the same area in the chrominance planes is broken down into 8-pixel by 8-pixel blocks. Most video compression algorithms use the concept of a “macro block”, which allows motion estimation, that contains four 8-pixel by 8-pixel luminance blocks and the two corresponding 8-pixel by 8-pixel chrominance blocks (BDTI). Spatial v. Temporal Redundancy. Two other concepts necessary in video compression are spatial and temporal redundancy. Temporal redundancy is when two or more pixels in separate video frames have the exact same values in the exact same location in each frame. Spatial redundancy occurs when pixels in a frame are duplicated within the same frame. Without the exploitation of these two types of redundancy, video compression would not be possible. Given these basic concepts, it is now possible to proceed to consideration of current standards.

VIDEO COMPRESSION STANDARDS

MPEG-1: MPEG-1 is a group of standards consisting of 5 parts. The 5 different parts are detailed in the following table (Wikipedia, 2008, verified by the author of the paper through ISO/IEC 11172 text (Chiariglione, 2000) (Unfortunately, an in-depth discussion of all parts is beyond the scope of this paper):
|Part |Title |Description |
|Part 1 |Systems |Synchronization and multiplexing of video and audio (MPEG-1 Program |
| | |Stream). |
|Part 2 |Visual |A compression codec for visual data (video, still textures, synthetic|
| | |images, etc.). One of the many "profiles" in Part 2 is the Advanced |
| | |Simple Profile (ASP). |
|Part 3 |Audio |A set of compression codecs for perceptual coding of audio signals, |
| | |including some variations of Advanced Audio Coding (AAC) as well as |
| | |other audio/speech coding tools. This standard defines three levels:|
| | |MP1 (MPEG-1 Audio Layer I), MP2 (MPEG-1 Audio Layer II), and MP3 |
| | |(MPEG-1 Audio Layer III) |
|Part 4 |Conformance |Describes procedures for testing conformance to other parts of the |
| | |standard. |
|Part 5 |Reference Software |Provides software for demonstrating and clarifying the other parts of|
| | |the standard. |

The goal of the MPEG-1 standard was to enable the effective storage on a CD-ROM of VHS-quality video at bit rates up to 1.5Mb/sec with a resolution of 352 pixels by 240 pixels, although the MPEG-1 standard supports resolution up to 4095 pixels by 4095 pixels and bit rates up to 100Mbits/sec. The MPEG-1 standards support only progressive scan video. The development of MPEG-1 enabled Video CDs and interactive CDs known as CDi. One of the most-well known standards within the MPEG-1 standards is the MPEG-1 Audio Layer III standards (affectionately known as MP3). The compression algorithm for MPEG-1, and also MPEG-2, defines three types of coded frames: (1) The I-frame, or intraframe, that is a frame coded as a still image. There is no reference to past or future frames in the sequence. (2) The P-frame, or predicted frame, that is a frame predicted from either the last I or P-frame, and (3) the B-frame, or bi-directional frame, that is a frame predicted from the two closet I or P-frames, one from the past and one from the future. While encoding this stream of frames, the standards dictates that after every 12 frames, an I-frame should be created to enable error correction. A sample encoded bitstream would look like this: IBBPBBPBBPBBIBBPBBPBBPBBI…… [and so on]. By placing an I-frame every frame, a reference or continuation point is created in the event of error. The drawback to this encoding is the increased computational power required from the encoding systems. MPEG-2: MPEG-2 is a group of standards consisting of 9 parts. The 9 different parts are detailed in the following table (Wikipedia, 2008, verified by the author of the paper through ISO/IEC 13818 text (Chiariglione, 1996) (Again, an in-depth discussion of all parts is beyond the scope of this paper):

|Part |Title |Description |
|Part 1 |Systems |Synchronization and multiplexing of video and audio (MPEG-1 Program |
| | |Stream). |
|Part 2 |Visual |A compression codec for visual data (video, still textures, synthetic|
| | |images, etc.). One of the many "profiles" in Part 2 is the Advanced |
| | |Simple Profile (ASP). |
|Part 3 |Audio |A set of compression codecs for perceptual coding of audio signals, |
| | |including some variations of Advanced Audio Coding (AAC) as well as |
| | |other audio/speech coding tools. This standard defines three levels:|
| | |MP1 (MPEG-1 Audio Layer I), MP2 (MPEG-1 Audio Layer II), and MP3 |
| | |(MPEG-1 Audio Layer III) |
|Part 4 |Conformance |Describes procedures for testing conformance to other parts of the |
| | |standard. |
|Part 5 |Reference Software |Provides software for demonstrating and clarifying the other parts of|
| | |the standard. |
|Part 6 |Extensions for Digital Storage Media Command and |Provides a syntax for controlling VCR-style playback and |
| |Control DSM-CC |random-access of bitstreams encoded onto digital storage mediums such|
| | |as compact disc |
|Part 7 |Advanced Audio Coding (AAC) |Addresses the need for a new syntax to efficiently de-correlate |
| | |discrete mutlichannel surround sound audio |
|Part 9 |Extension for real time interface for systems |Defines a syntax for video on demand control signals between set-top |
| |decoders |boxes and head-end servers |
|Part 10 |Conformance extensions for Digital Storage Media | |
| |Command and Control (DSM-CC) | |

The goal of the MPEG-2 standard was to enable support for DVDs and HDTV. To accomplish this, MPEG-2 was designed to support bit rates of up to 40Mb/sec, with a resolution of 1,920 by 1,080 pixels. Both interlaced video and progressive scan video are supported by the MPEG-2 standards. Additionally, MPEG-2 Audio supports multichannel audio, specifically the 5.1 standard so prevalent in today’s home theater systems, and it will also support the newer 7.1 standards. MPEG-2 is fully backward compatible with MPEG-1. The MPEG-2 systems standard specifies how to combine multiple audio, video, and private-data streams into a single multiplexed stream, and it supports a wide range of broadcast, telecommunications, computing, and storage applications (Davis, 1998). MPEG-2 introduces two new concepts not available in the MPEG-1 standard: profiles that “define limits on the algorithmic complexity that may be used in the video signal (and complexity in the encoder and decoder) (Ruiu, 1997)” and levels that “define the resolution and the quality of the video (Ruiu)”. The various levels are detailed in the following tables (Tudor):
|Level | |
|Simple |Same as main but without B-frames, primarily intended |
| |for software decoders |
|Main |Low-cost single chip implementation for cable TV and |
| |satellite uplink compression |
|Spatial |Main with spatial scalability, e.g. HDTV |
|SNR |Spatial with SNR scalability |
|High |SNR with 4:4:4 chrominance in the macroblocks |

MPEG-4: The MPEG-4 standard, finalized in October 1998, has the technical designation: “ISO/IEC 14496”. The MPEG-4 ISO/IEC standard was developed by the Moving Picture Experts Group (MPEG). The development, standardization, and finalization of the MPEG-4 standard made possible many new digital video content delivery avenues such as video CD-ROM, DVD, and digital television. The technical elements of a standardized MPEG-4 provides make possible the integration of the production, distribution and content access paradigms of digital television, interactive multimedia on the world wide web, and interactive graphics applications (Koenen, 2001). MPEG-4, likes its predecessors MPEG-2 and MPEG-1, is fully backward compatible. MPEG-4 supports bit rates between 5kb/sec and 10Mb/sec. Additionally MPEG-4 supports progressive scan and interlaced video. MPEG 4 is not a single standard, but rather a collection of standards known as parts, currently 23. The 23 different parts are detailed in the following table (Wikipedia, 2008, verified by the author of the paper through ISO/IEC 14496 text (Koenen, 2002) (Discussion of all parts is beyond the scope of this paper):
|Part |Title |Description |
|Part 1 |Systems |Describes synchronization and multiplexing of video and audio. For |
| | |example Transport stream. |
|Part 2 |Visual |A compression codec for visual data (video, still textures, synthetic|
| | |images, etc.). One of the many "profiles" in Part 2 is the Advanced |
| | |Simple Profile (ASP). |
|Part 3 |Audio |A set of compression codecs for perceptual coding of audio signals, |
| | |including some variations of Advanced Audio Coding (AAC) as well as |
| | |other audio/speech coding tools. |
|Part 4 |Conformance |Describes procedures for testing conformance to other parts of the |
| | |standard. |
|Part 5 |Reference Software |Provides software for demonstrating and clarifying the other parts of|
| | |the standard. |
|Part 6 |Delivery Multimedia Integration Framework (DMIF). | |
|Part 7 |Optimized Reference Software |Provides examples of how to make improved implementations (e.g., in |
| | |relation to Part 5). |
|Part 8 |Carriage on IP networks |Specifies a method to carry content on IP networks. |
|Part 9 |Reference Hardware |Provides hardware designs for demonstrating how to implement the |
| | |other parts of the standard. |
|Part 10 |Advanced Video Coding (AVC) |A codec for video signals which is technically identical to the ITU-T|
| | |H.264 standard. |
|Part 11 |Scene description and Application engine("BIFS") |Can be used for rich, interactive content with multiple profiles, |
| | |including 2D and 3D versions. |
|Part 12 |ISO Base Media File Format |A file format for storing media content. |
|Part 13 |Intellectual Property Management and Protection | |
| |(IPMP) Extensions. | |
|Part 14 |MPEG-4 File Format |The designated container file format for MPEG-4 content, which is |
| | |based on Part 12. |
|Part 15 |AVC File Format |For storage of Part 10 video based on Part 12. |
|Part 16 |Animation Framework eXtension(AFX). | |
|Part 17 |Timed Text subtitle format. | |
|Part 18 |Font Compression and Streaming | |
|Part 19 |Synthesized Texture Stream. | |
|Part 20 |Ltwt. Appl Scene Representation (LASeR). | |
|Part 21 |MPEG-J Graphical Framework eXtension (GFX) |(not yet finished - at "FCD" stage in July 2005, FDIS January 2006). |
|Part 22 |Open Font Format Specification (OFFS) based on |(not yet finished - reached "CD" stage in July 2005) |
| |OpenType | |
|Part 23 |Symbolic Music Representation(SMR) |(not yet finished - reached "FCD" stage in October 2006) |

Of the 23 parts mentioned in the previous table, MPEG-4 Part 2 and MPEG-4 Part 10 generate the most confusion. While they are both part of the MPEG-4 group of standards, they are not the same standard. Both offer better compression ratios than MPEG-2, but MPEG-4 Part 2 (ASP) does not have the same tool sets, like context-adaptive binary arithmetic coding (CABAC) or a LoopFilter for deblocking, as those found in MPEG-4 Part 10 (AVC). Because the MPEG-4 Part 2 Video standard is widely-deployed, it has found particular usefulness in mobile phones, video conferencing technology, and digital cameras and camcorders. The MPEG-4 Part 2 Video codec is divided into several profiles for video coding but the following two are the most common: (1) Simple Visual Profile (MPEG4-SP), which is designed for low bit rate and low resolution applications because of its low computational complexity, and (2) Advanced Simple Visual Profile (MPEG4-ASP), which offers higher resolutions and better video quality at the same low-bite rates, is more computationally complex, and is better suited for applications involving home video (Fraunhofer, 2006). The MPEG-4 Part 10 standard, also known as MPEG-4 Advanced Video Coding (AVC) or ITU-T H.264, enables video sequence coding to be performed at half the bit rate of MPEG 2 without reducing image quality (Tamhankar & Rao, 2003). This advance enables the delivery of high-quality video at rates below 1Mbit/s, but requires significantly more computing resources from the CPU or memory (Fraunhofer). The MPEG-4 AVC standard can be found in standards used in Blu-Ray DVD, Digital Video Broadcasting and the Internet Streaming Media Alliance’s standards for the streaming of digital video multimedia content (Fraunhofer). The overarching goal of the development of the MPEG-4 standard is to reduce the number of proprietary formats and players. MPEG-4 provides assurance that content developed through this standard can be deployed to players and distribution channels manufactured or created following this standard. A core concept of the MPEG-4 standard is the concept of media objects. Media objects can be created naturally by a camera or other image/video device for visual content or with a microphone or other audio device for aural content. Media objects can also be synthesized or generated by a computer. The goal is to reduce the number of proprietary formats and players, and is accomplished through the following: (1) providing standardized methods of representing media objects, which are units of aural content, visual content, or a combination of the two (audiovisual); (2) defining the composition of media objects so that audiovisual scenes can be formed by the creation of compound media objects; (3) enabling data transportation over network channels by multiplexing and synchronizing the data associated with media objects; and (4) interacting with the newly formed audiovisual scenes on the content receiver’s end of the network (Koenen). The MPEG-4 standard provides benefit across the spectra of development and use by satisfying the needs of authors, service providers; and end users (Koenen). MPEG-4 benefits authors by making their content more reusable and more flexible because the content is not limited to singular deployment methodology. An author’s content can now traverse diverse mediums such as digital television, the World Wide Web (WWW), and digital video disc. Additionally, authors benefit from increased rights protection and management of these associated rights. Network service providers benefit because MPEG-4 enables Quality of Service (QoS) by providing the different MPEG-4 media with generic descriptors. MPEG-4 ensures that the appropriate QoS is employed, depending on the nature of the specific media objects and combinations thereof, in order to provide heterogeneous networks with optimized end-to-end transport of data (Koenen). End users realize the benefits of the MPEG-4 compression standard in the form of significantly more interactive content and expanded choice of delivery media, such as high-definition DVD, mobile communications, and IPTV (ISO, 2001). Given this basic understanding of these standards, these standards all offer the underlying premise of video compression; but there are differences between the standards. An abbreviated examination of these differences follows.

COMPARISON OF THE CURRENT VIDEO COMPRESSION STANDARDS

When comparing the current video compression standards, it is vital to remember that while the MPEG-4 group of standards contains both the MPEG-4 Part 2 standard and the MPEG-4 Part 10 standard, they are not the same standard. The following points summarize the major highlights of the standards (Girod, n.d.):
|OVERVIEW: VIDEO CODING STANDARDS |
|MPEG-1 |
|Target bit-rate about 1.5 Mbps |
|Typical image format CIF, no interlace (352 x 240 Pixel) |
|Frame rate 24 ... 30 fps for progressive scan video |
|Main application: CD video storage |
|MPEG-2 |
|Extension for interlace, optimized for TV resolution (NTSC: 704 x 480 Pixel) |
|Image quality similar to NTSC, PAL, SECAM at 4 -8 Mbps |
|HDTV at 20 Mbps |
|MPEG-4 |
|Object based coding |
|Wide-range of applications, with choices of interactivity, scalability, error resilience, etc. |
|Part 10 AVC (H.264) offers over a 50% improvement in compression compared to MPEG-2 resulting in the same image quality but only |
|half the bit-rate (Envivo, 2006) |

One way to quantify the differences between the standards is to look at the standards performance on the same digital video content. The following chart details the performance comparison of MPEG-2, MPEG-4 ASP, and MPEG-4 AVCA for a 90-minute DVD-quality movie (Envivio).
[pic]

The following table compares the MPEG-1, MPEG-2, MPEG-4 ASP, and MPEG-4 AVC feature sets (Envivio).

|Features |Standards |
| |MPEG-1 |MPEG-2 |MPEG-4: Pt 2 (ASP)|MPEG-4: Pt 10 |
| | | | |(AVC) |
|I, P, B Frames |( |( |( |( |
|Interlace | |( |( |( |
|Coding |Huffman |Huffman |Huffman |Huffman or Arithmetic |
|Block Size |Fixed 16 x 16 |Fixed 16 x 16 |Fixed 16 x 16 |Variable down to 4x4 |
|¼ Pixel | | |( |( |
|GMC | | |( | |
|Loop Filter (Deblocking Filter) | | | |( |
|Slice Based Motion Prediction | | | |( |
|Multiple Reference Frames | | | |( |
|MB AFF (Improved Interlace Mgmt) | | | |( |
|RDO (Rate Distortion Optimisation) | | | |( |
|WP (Weighted Prediction) | | | |( |
|Switching Pictures (For fast change channel)| | | |( |

The standards examined previously are not married to a specific delivery method. However, an analysis of the economics of video content delivery requires a pithy discussion of various content delivery methodologies.

VIDEO DELIVERY METHODS

Numerous delivery methods are available for digital video content, and they can be classified into two general categories: (1) broadband for video streaming or (2) download and prepackaged. For ease of discussion, portable viewing devices, such as the iPod, are not discussed here because they require a method to receive the content prior to display of the content. The broadband category includes the following: • Broadband Cable – Supports upload and download speeds as detailed in the following edited table from Wikipedia (Wikipedia, 2008) and verified at CableLabs (CableLabs, 2008)
|DOCSIS Specification |Downstream (Useable) |Upstream (Useable) |
|1.x |38 Mbit/s |9 Mbit/s |
|2.0 |38 Mbit/s |27 Mbit/s |
|3.0 4channel |152 Mbit/s |108 Mbit/s |
|3.0 8channel |304 Mbit/s |108 Mbit/s |

• Fiber Optic Broadband – Verizon Communications offers fiber optic cable over the last mile to the customer site and supports speeds up to 50Mb/s downstream and 20Mb upstream. Currently it offers this service in only selected service areas, • Internet Protocol Television (IPTV) – IPTV is a content delivery “system capable of receiving and displaying a video stream encoded as a series of Internet Protocol packets” (Anderson, 2006) which typically traverses a DSL line that supports transfer rates up to 25Mb/s. • Cellular Phones - Currently several cellular phone providers offer broadband access with download speeds of up to 1.4 Mb/s.
Prepackaged content delivery is comprised mainly of discs. The three most well-known types of disc in use today follow: • CD – Capable of storing ~700MB of data. • Standard DVD – Capable of storing ~4.7GB (single layer) and 8.54GB (dual layer) of data. • Blu-Ray DVD – A high-definition DVD capable of storing ~50GB of data.

ECONOMICS OF VIDEO CONTENT DELIVERY

Consumer demand for video content continues to grow. Canadians watched more than 2 billion low-def videos, mostly from websites such as YouTube, in December 207 alone; this represents an average of almost 120 videos/month per person (Lasalle, 2008). The reality is that the demand for high-def video and accompanying bandwidth is only going to increase as users expand their avenues for receiving this content (Lasalle). Avenues that were once limited to the computer and standard television sets have now been expanded to include the cell phone, and ubiquitous iPod, not to mention the astounding increase in HDTV units in the marketplace. As advances in compression have increased the avenues available for content distribution, consumers have started seeing these new avenues as a way to control what they watch and when they watch it. This new attitude is leading the rise in popularity of video-on-demand (VOD) services. A new study from Solutions Research Group reports 14% of those surveyed said that they watched a VOD TV show, compared with 20% of the respondents who said they watched a TV show vie the internet each week. According to Whitney, broadband is in over 60 million U.S. homes, whereas digital cable market penetration is just over half that amount, at a little over 35%. Broadcast networks provide online show content to enable viewers to stay current with their favorite shows. VOD offers movies and other associated programming, but either they are out of date or too expensive from the customer viewpoint, according to almost 30% of customers with VOD in a survey of VOD customers. Broadband also is becoming increasingly popular because it is faster to search for content online and consumers can find content more easily (Whitney, 2008). According to Screen Digest, the TV download market in the United Kingdom expects to grow from just over £277,000 (US $500,000) in 2006 to £65m (US $130M) by 2011. According to Ofcom, broadband internet has a 40% market penetration in the UK, and almost 40% of those customers download video content, according to Skyview (Esposito, 2007). According to the Entertainment Merchants Association (EMA), consumers in the US spent almost $40 billion in 2007 on home video and video games, which is almost an average of $120 per person. Sales of HD disks comprised only .5% or ~$120M of video sales, but, by 2009, that figured is expected to reach almost $20B. More significantly, VOD spending was over $1 billion. Helping to drive these numbers is the fact that nearly 20% of consumers report that they have watched movies on a portable device, and almost 95% of consumers reported listening to music on a portable device (EMA, 2008). As detailed in the preceding text, video content depends on two technical constraints, which in turn drive the economics of the industry: the amount of data that can be transported, and the amount of data that can be stored. Advances in compression technology have reduced both the amount of bandwidth and storage necessary to deliver and store content. After February 2009, the landscape for video content changes significantly with the cessation of analog broadcasts. After this cessation, the demand for digital content, especially enhanced digital content such as hi-definition, will increase markedly as consumers who delayed the migration from analog to digital capability are forced to make the change. Another impetus for the switch to digital video content is the commoditization of technology, as evidenced by the drop in the prices of DVD players and the fact more than 88M households now has DVD capability, and more than 55% of those households have multiple DVD players (EMA). Advances in video compression have profoundly affected the methods by which video content is made available. In the past few years, consumers have indicated through the popularity of digital content services like Napster and iTunes, that they want to purchase digital content. It is incumbent on the industry to develop viable economic models, be they ad-supported, subscription-based, or a la carte, that will take advantage of the different methods of video content delivery to satisfy the consumer.
REFERENCES:
Anderson, N. An introduction to IPTV. Arstechnica. Retrieved April 3, 2008, from http://arstechnica.com/guides/other/iptv.ars
Apostopoulos, J. & Wee, S. Video Compression Standards. 2000. from http://www.techonline.com/showArticle.jhtml?articleID=202404370&queryText =video+compression+standards
Berkeley Design Technology, Inc. (2007). How video compression works. Video Imaging | Design Line. Retrieved March 22, 2008, from http://www.dspdesignline.com/201202637
Berkeley Design Technology, Inc. (2007). Introduction to video compression. Video Imaging | Design Line. Retrieved March 22, 2008, from http://www.dspdesignline.com/201202637
CableLabs. DOCSIS Specifications Archive. Cable Labs. Retrieved March 26, 2008, from http://www.cablelabs.com/specifications/archives/docsis.html
Chiariglione, L. MPEG-1. ISO/IEC JTC1/SC29/WG11 Coding of Moving Pictures and Audio. Retrieved April 5, 2008, from http://www.chiariglione.org/mpeg/standards/mpeg-1/mpeg-1.htm
Chiariglione, L. MPEG-2. ISO/IEC JTC1/SC29/WG11 Coding of Moving Pictures and Audio. Retrieved April 5, 2008, from http://www.chiariglione.org/mpeg/standards/mpeg-2/mpeg-2.htm
Davis, A. TechOnline. An Overview of Video Compression Algorithms. Retrieved April 3, 2008, from http://www.techonline.com/showArticle.jhtml?articleID=192200542&queryText =video+compression
Entertainment Merchants Association. 2007 Annual Report. Entertainment Merchants Association. Retrieved April 4, 2008, from http://www.entmerch.org/annual_reports.html
Esposito, M. (2007, December). Viewers make demands on TV. Marketing, pp. 36-37.
Envivio Staff. (2006). MPEG-4 Overview. Envivio. Retrieved March 28, 2008, from http://www.envivio.com/technology/mpeg4_overview.php
Fraunhofer Institute. MPEG-4 Video Solutions. The Fraunhofer Institute, 2006. 2 p.
Girod, B. Overview: Video Coding Standards. Stanford University. Retrieved March 18, 2008, from http://www.stanford.edu/class/ee398b/handouts/lectures/04-StandardsMPEG1 24.pdf
International Organisation for Standardisation. "Coding of Moving Pictures and Audio." MPEG-4 Overview - (V.18 - Singapore Version). In (Koenen, R., Ed.). 2001.
Koenen, R. MPEG-4. ISO/IEC JTC1/SC29/WG11 Coding of Moving Pictures and Audio. Retrieved April 5, 2008, from http://www.chiariglione.org/mpeg/standards/mpeg-4/mpeg-4.htm
Lasalle, L. (2008, March 25). Move to hi-def video online means Internet's backbone needs more strength. The Canadian Press.
Panusopone, K. & Luthra, A. (May 2001). Performance comparison of MPEG-4 and H.263+ for streaming video applications. Circuits, Systems, and Signal Processing, 20(3-4), 293-309.

Richardson, Iain (2003). H.264 and MPEG-4 Video Compression: Video Coding for Next Generation Multimedia. Hoboken, NJ: Wiley
Ruiu, D. "An Overview of MPEG-2." The 1997 Digital Video Test Symposium. 1997. Retrieved March 21, 2008, from http://cp.literature.agilent.com/litweb/pdf/5966-1031E.pdf
Sauer, J. (2006). Digital Video Compression Basics. Sound & Video Contractor, 24, 6., pp. 38-46.
Sullivan, G. & Wiegand, T. (January 2005). Video Compression - From Concepts to the H.264/AVC Standard. Proceedings of the IEEE, 93(1), 18-31.
Sikora, T. (1997, September). MPEG digital video-coding standards. IEEE Signal Processing Magazine, 14, 5., pp. 82-100.
Tamhankar, A. & Rao, K. (2003). An overview of H.264/MPEG-4 Part 10. 4th EURASIP Conference on Video/Image Processing and Multimedia Communications, 2003, 1(2), 1-51.
Tudor, P. (1995). MPEG-2 Video Compression. Electronics & Communication Engineering Journal, 7(6), 257-264.
Wikipedia. DOCSIS. Wikipedia - The Free Encyclopedia. Retrieved March 28, 2008, from http://en.wikipedia.org/wiki/DOCSIS
Wikipedia. MPEG-1. Wikipedia - The Free Encyclopedia. Retrieved March 28, 2008, from http://en.wikipedia.org/wiki/MPEG-1
Wikipedia. MPEG-2. Wikipedia - The Free Encyclopedia. Retrieved March 28, 2008, from http://en.wikipedia.org/wiki/MPEG-2
Wikipedia. MPEG-4. Wikipedia - The Free Encyclopedia. Retrieved March 28, 2008, from http://en.wikipedia.org/wiki/MPEG-4
Whitney, D. (2008). Online Viewing Preferred to VOD, Study Says. Television Week, 27(5), 4.
Wu, D., Hou, Y., Zhu, W., Zhang, Y. & Peha, J. (March 2001). Streaming video over the Internet: approaches and directions. IEEE Transactions on Circuits and Systems for Video Technology, 11(3), 282-300.