Delivering More Video Content at Half the Cost Using MPEG-4 AVC Bob Wilson Chairman & CEO

AVC Finally Delivers on the Technical Vision First Described in 1954 by RAND Corporation!

Modulus Video Copyright

Modulus Video Real-time SD & HD “broadcast quality” encoders and decoders Powerful AVC platform –Software centric encoding –CPU’s and FPGA’s accelerate to real-time SD systems shipping now! HD systems 1 st half 2005 VC backed company founded by broadcast industry veterans

Modulus Video Copyright Video Compression is Mainstream!

Modulus Video Copyright AVC’s Impact on Content Less cost = more content MPEG-4 AVC: the future for all consumer systems –HD DVD’s & Blu-ray DVD’s –HD camcorders –Mobile video & cell phones Apple has already announced support for AVC in their Final Cut Pro professional editing solutions AVC is the next generation encoding standard for content creation & delivery

Modulus Video Copyright A New Standard Arrives – MPEG-4 AVC! MPEG-4 AVC Advanced Video Coding New worldwide standard approved in May 2003 Delivering full resolution video at half the bit rate of MPEG-2 Hundreds of companies now working to deliver practical solutions from “beginners to broadcasters” Both new HD DVD & Blu Ray formats utilize AVC ISO/MPEG ITU-T (VCEG) Joint Video Team MPEG-4 AVC

Modulus Video Copyright Performance - AVC is on a Steep Improvement Curve Near term - 50% less bit rate for many sequences Benefits greatest for many sequences that are tough for MPEG-2 Efficiency will continue to improve CBR Video Bit Rates

Modulus Video Copyright Evolution not Revolution No fractals, wavelet or object coding Block based processing Familiar GOP Picture structure –I- Intra coded pictures interleaved with P and B pictures –P- Forward motion predicted pictures –B- Bi directional motion predicted pictures Same rules apply –Familiar compression artifacts –Benefits from Statistical multiplexing and noise reduction I B B B P B B B P B B B AVC Retains Familiar Picture Structure

Modulus Video Copyright Enhanced Toolset Delivers Efficiency Substantially better motion prediction Better intra prediction modes New entropy encoding technology In loop de-blocking filter New integer transform New quantization mechanisms Temporal (motion) and spatial prediction TransformQuantizationEntropy Coding Inverse Transform Inverse Quantization De-blocking Filter 10X More Computational Complexity!

Modulus Video Copyright Enhanced Motion Prediction Modes ¼ pixel prediction doubles the accuracy Hierarchical block size options track objects more accurately More references combinations Weighted prediction helps convey fades and dissolve MBAFF – Macro block adaptive field frame coding Temporal (motion) and spatial prediction TransformQuantizationEntropy Coding Inverse Transform Inverse Quantization De-blocking Filter

Modulus Video Copyright Enhanced Entropy Coding Entropy coding removes statistical redundancy from bit stream Fully defined loss less codec Similar to ZIP application AVC offers two advanced option –Context Adaptive Variable Length Code (CAVLC) –Context Adaptive Binary Arithmetic Coding (CABAC) CABAC is very complex but powerful –Delivers around 15% efficiency gain Temporal (motion) and spatial prediction TransformQuantization Entropy Coding Inverse Transform Inverse Quantization De-blocking Filter

Modulus Video Copyright New Transforms and Quantization AVC has new 4x4 transform –Converts pixel array into string of coefficients –Coefficient string can be quantized to control bit rate Addresses inaccuracies that exist with MPEG-2 Ease of processing Enhanced quantization tools Temporal (motion) and spatial prediction TransformQuantization Entropy Coding Inverse Transform Inverse Quantization De-blocking Filter

Modulus Video Copyright Smaller blocks good for tracking detail Large blocks good for flat areas 4 x 4 8 x 4 8 x 8 4 x 8 16 x 16 One New Tool: Adaptive Block Sizing MPEG-2 used large 16x16 blocks –Good for large objects –Not so good for tracking small objects AVC offers hierarchical block sizing –Adaptive block sizes Benefit is motion objects tracked accurately –Less residual error More Tools, More Processing, but Fewer Bits

Modulus Video Copyright New De-Blocking Filter NEW - MPEG-2 does not have this feature Aggressive encoding will tend to result in block artifacts Block edges are processed- smoothed Up to 3 pixels either side of block to reduce the visible impact Temporal (motion) and spatial prediction TransformQuantizationEntropy Coding Inverse Transform Inverse Quantization De-blocking Filter

Modulus Video Copyright AVC Compression = Broadcast Mbps Standard defines Decoder –Many low cost chips available this year AVC enables dramatic expansion of low cost video distribution –More channels at lower cost –New channels such as IPTV by Telcos Remove temporal redundancy Transform and quantize Entropy reduction Remove spatial redundancy Standardized Decoder Model Tightly defined bit Stream Syntax Encoding Process Standardized Bit Stream and Decoding Process

Modulus Video Copyright AVC Gets Better! Fidelity Rate EXTensions (FRExt) Extension approved in July 2004 Enhanced modes for SD and HD 4:2:2, 4:4:4 chroma modes Enhanced quantization Benefit - extend support to wider range of applications Profile NameMaximum Chroma FormatMaximum Sample Precision "High" (HP)4:2:08 bits "High 10" (Hi10P)4:2:010 bits "High 4:2:2" (Hi422)4:2:210 bits "High 4:4:4" (Hi444)4:4:412 bits

Modulus Video Copyright AVC Deployment Scenarios AVC complexity - incompatible with MPEG-2 receivers –Hence MPEG-2 will be around for years AVC will increasingly erode MPEG-2 market share –Especially for HD & new applications (mobile video) Increasing use of IP networks for TV –Telco triple play –Professional point to point –Enterprise video –Homeland security AVC Encoder IP Network Tx Gateway AVC Decoder IP Network Rx Gateway WWW IP NETWORK GATEWAYS Protect from Network Anomalies Jitter Packet loss Packet re-ordering Delay

Modulus Video Copyright High Definition = 6x more Information AVC = Practical HDTV HD is exploding –More content being created –Receivers becoming affordable –Service operators are promoting it –A must have service for many applications HD is very bandwidth intensive –Big benefits using AVC

Modulus Video Copyright Summary: AVC is Happening! AVC brings compelling performance benefits + Enables new applications and economic models + Open standards key for the industry growth + AVC SD real-time solutions available now + AVC HD Available in 2005 = More Lower Cost AVC as a Disruptive Technology is Opening Up New Business Opportunities

Delivering More Video Content at Half the Cost Using MPEG-4 AVC Bob Wilson Chairman & CEO