Show time for new video compression

Privately held Pulsent on Monday will take the wraps off a new compression technique that the company claims can shrink digital video to about a fourth of the size of standard methods currently used in the cable and Internet industries.

The start-up joins a long list of rivals including Microsoft, RealNetworks, DivX Networks and others that hope to deliver broadcast quality programming over the Internet--the holy grail for nascent video-on-demand (VOD) services.

Pulsent not only promises eye-popping performance improvements. The company positions its technology as a major break from its rivals, offering a rare alternative to video standards developed in the past two decades under the auspices of the Moving Picture Experts Group (MPEG).

"Pulsent's opportunity is to be the compression of choice for on-demand services," said Gerry Kaufhold, principal analyst with Cahners In-Stat Group MDR. "They provide a better price-performance than MPEG."

The race for video compression comes as Hollywood studios begin to position themselves for the day consumers can call up programming over cable or computer networks at will. Last fall, Walt Disney and News Corp.'s 20th Century Fox studio announced plans to create a joint VOD service. That announcement followed a deal struck in mid-August among AOL Time Warner, Sony, Vivendi Universal, Viacom's MGM and Paramount to develop a similar service.

Those announcements point to a potentially enormous payoff for companies such as Pulsent, if its technology is eventually used to build the system for seamlessly delivering digital video to millions of consumers at the click of a mouse or remote control.

MPEG remains a serious competitor in this arena, with growing support for the latest version of the technology. MPEG-4 offers a host of new features as well as substantial improvements in compression over MPEG-2, the current digital video standard.

Both RealNetworks and Apple Computer have endorsed MPEG-4, although a licensing dispute has raised a cloud over its immediate future as a standard. While Microsoft is going its own way, it has incorporated some MPEG-4 technology into its Windows Media video format.

Analysts said Pulsent's goal is not to compete with MPEG, but to find niche markets where MPEG has not already become established.

"Pulsent realizes that companies already using MPEG will continue using MPEG," Kaufhold said. "But for on-demand video services Pulsent has an opportunity...MPEG 2 video usually requires about 3 megabits per second per video stream. If Pulsent can offer high-quality video at 1.5 megabits per second, which they claim, there's an opportunity."

A better mousetrap?
Founded in 1998 by Adityo Prakash and Eniko Fodor, Pulsent has raised about $33.5 million in two rounds of funding from JP Morgan Partners, Oak Investment Partners, Polycom, Index Ventures, among others.

Pulsent has created more than just a compression algorithm, Prakash said. It is also engineering a multimedia chip to carry its video format that will include support for MPEG-1, MPEG-2 and MPEG-4.

The company has plans to unveil other technology down the road aimed at solving Internet video delivery problems such as packet loss, congestion and buffering.

For now it is interested primarily in showcasing its video codecs, or the mathematical formulas that are used to squeeze data out of files without significant loss of viewing quality.

Here Pulsent claims that it has departed completely from the MPEG framework developed in the past two decades.

According to the company, MPEG technology uses a grid system that breaks each video frame into small pieces and uses them as the building blocks for an image. Pulsent focuses not on blocks but on what it calls "intelligent objects" on the screen.

Pulsent's objects do not correspond directly to physical objects such as a car or a building. Rather they represent logical groupings that might capture the folds in a shirt, for example. Each physical object may be represented by dozens of such visual objects.

According to Pulsent, the technique provides a powerful shorthand that overcomes many of the problems in block compression.

MPEG-4 also makes substantial use of objects, but it uses them in a different way, Prakash said. While MPEG-4 adds an object layer on top of an underlying block grid structure, he said, Pulsent makes objects the basic building blocks for the image itself.

"We were going down uncharted territory so we had to create our own way to navigate it," Prakash said.

Prakash said Pulsent is currently negotiating with major telecommunications companies to license its technology for use in a comprehensive service offering video-on-demand, cable programming and Internet access over DSL lines.

Nevertheless, analysts said Pulsent's acceptance in the marketplace remains uncertain.

"The company's biggest obstacle is signing up a big customer, such as a DVD player manufacturer, a video manufacturer, or a set-top box maker offering on-demand videos," Kaufhold said.

"The market that Pulsent is aiming for is a late 2003 market, when on-demand video services will likely take off and the movie studios will start making their good content available."