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BBest Compression Technique for Images Sequence?

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Hey, hoping some people who hang around might chime in with some opinions. I'm working on some minor restorations to ANH, and decided for what I wanted to do, the best thing was to rip the DVD VOBs to M2V, then save the shots I'm working on as a Targa sequence, with some basic HSV boosts in VirtualDub. On top of that I've rotoscoped some new elements, and created some mattes I'm using to adjust regions within the shot. I'm compositing and colour correcting it all in Vegas as it's what I'm most familiar with; though I do have access to a Combustion desk, as well as TMPGEnc. The problem is, what Vegas spits out as an Mpeg file is garbage - over saturated, with unacceptable artifacting. Can anyone recommend a workflow which achieves a decent quality MPEG2 encode from a still sequence?
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A TGA sequence is just a lossless method of compression, so your source before processing should be no different to the original M2V file.

An MPEG encoder should not alter colour saturation. MPEG compression artefacts are caused by too low a bitrate. I would say the problem lies with your settings in Vegas' encoder, rather than your technique/workflow.

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Thanks, Moth3r. Yeah, that's one of the reasons I went with TAGA (would have preffered RLA or something that makes more reasonable file sizes, but there's not as much support for them in NLEs); the other being that I can just paint directly on each frame in Photoshop. Bitrate shouldn't be an issue; I'm encoding VBR with a max of 9800, and an average of 6000. Well, the other possible problem is that Vegas is using MainConcept for it's MPEG2 encoding, and while it's certainly common enough, it's hardly the best encoder around, but it hasn't acted like this before so I was thinking maybe it handled DV better than a still sequence. Maybe something that can do more than 2 pass-encoding, or maybe using CBR instead of VBR? ANy opinions?

A second question regarding the rip from Virtualdub to those who'd know...VDub has identified the video on the ANH official disc as being 23.976 fps, and played at that framerate it's fine in Vegas, but GSpot, MPeg Validator, and MpegPRoperties all say it's 29.97. What's with the discrepancy, and am I actually loosing 6 fps of extra data? Anyone had this happen?
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MainConcept/TMPGEnc, CBR/VBR, 2-pass/5-pass - whatever, it should not affect the saturation of the output clip. Could you provide screenshots of a source frame and the same frame from your encoded MPEG file?

2nd question: Although the video is encoded at 23.976fps, 3:2 pulldown is applied during playback to convert the framerate to 29.97fps (NTSC).

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Thanks again, yeah, the framerate flag business suddenly dawned on me last night while I was struggling with it can't believe I forgot that. As far as the crap-tastic m2v, it seems to have been something that Vegas was doing with a VBR file. Changed luminance or colour space when it rendered? Don't ask me, I don't have any clue why it should screw with the output like that. All I know is that the template produced crappy output every time. But setting it up manually instead of using one of the templates, and using CBR@9800 fixed it beautifully. Thanks again Moth3r (oh, yeah, and thanks for such great transfers too, I've been basing my rotoscope work on what I've been able to see in your ANH transfer )