Abstract: It has been determined that the amplitude accuracy required for specification of the chrominance portion of a color video signal is related to the spatial activity of the luminance portion of the signal. Accordingly, coding efficiency is improved in a digital transmission system by (1) defining a measure of the luminance activity and (2) changing chrominance coding strategy in accordance with the luminance activity measure. In one specific arrangement, coarse and fine quantizers are provided in an adaptive DPCM encoder. The coarse quantizer is used where luminance activity is high and the fine quantizer used only when the activity is low. In another arrangement, a variable gain circuit is disposed in the direct loop of an encoder with a fixed quantizer, and a variable attenuator is disposed in the feedback loop. For large spatial activity, the gain of the amplifier and the attenuator coefficient are held low; for small spatial activity the opposite condition prevails.