Abstract: A differential pulse code arrangement reduces the bit rate of a composite color video signal by sampling the video signal at a predetermined rate of m times the color sub-carrier frequency, predicting the present video signal sample from reconstructed past samples and forming signal representative of the prediction error in a first predictive loop. The bit rate is further reduced in a second predictive loop embedded in the first predictive loop by generating a signal predictive of the error signal and forming a signal corresponding to the difference between the error signal and the signal predictive thereof. The difference signal is quantized and encoded for transmission. The error signal is reconstructed by summing the quantized difference signal and the predicted error signal and the prediction of the error signal is formed responsive to the sequence of past reconstructed error signals.