After lying low for a couple of years, MPEG-4 -- the successor to the technologies that spawned the MP3 audio explosion -- is catching on with developers who are taking advantage of its ability to manipulate digital music and video files. MPEG-4 is a wide-ranging set of audio and video technologies designed in part to condense large digital packages into small files that can be easily transmitted online, much like today's most common media formats, such as MP3, RealVideo and Windows Media. But perhaps more important, proponents say, are the interactive features that MPEG-4 offers. For example, video functions almost like a Web page, allowing people to interact with the picture on the screen or to manipulate individual elements in real time. Like that dress that Julia Roberts is wearing? Simply click on her face to buy it. Want a closer look at what they're eating for dinner on "Survivor"? Zoom in for a close-up of the grub. The ability to give video itself the kind of interactivity that only Web sites and video games now enjoy has ignited the imaginations of advertisers and some Hollywood studios. To be sure, there's a long way to go before average consumers are interacting with actresses on their TV screens, but analysts say the technology bears considerable promise. "It's nice in theory," said Aram Sinnreich, a media analyst with Jupiter Research. "I think there's no question that when the infrastructure is there, and the costs are lower, there will be consumer demand." Like its predecessors MPEG-1 and MPEG-2, the standard includes a broad range of audio and video technologies that allow a wide variety of different applications, on- and offline. The best-known feature of those previous generations was the MP3 (or MPEG-1, Layer 3) music technology, which accidentally became a household name due to the spectacular success of the Napster music-swapping service. MPEG-2 provided the technical standard for most digital cable set-top boxes and for DVDs. The numbers then skip -- there is no MPEG-3 standard. MPEG-4, ratified as a standard by the Motion Picture Experts Group (MPEG) in 1999, has enough different pieces to keep video-technology junkies happy for years. It is able, for example, to crunch massive video files into pieces small enough to send over mobile networks. Backers tout it as one potential "killer app" for the fast mobile phone networks that will be built over the next few years and will desperately need new applications that can generate revenue. A few companies, most notably San Diego-based PacketVideo, have already begun touting video over the mobile phone's small screens, even over today's pokey mobile phone networks. While these blurry pictures are unlikely to persuade millions of people to immediately upgrade their mobile phones, it is early proof that the technology can function even under difficult circumstances. The standard also includes an audio format that updates the aging MP3, in much the same way that MP3 Pro does, but using a different technology standard with different companies' intellectual property involved. Those companies are not disclosed, as the MPEG group typically does not release information on exactly which parts of the standard include whose intellectual property rights. A licensing agent -- in MP3's case, Thomson Multimedia -- is typically responsible for distributing royalties once licensing terms have been settled. MPEG-4 also allows other types of content to be bundled into a file, such as video or images. Start-up Flavor Software has begun distributing MP4 songs that are about the same file size as an ordinary MP3, but that include a half-dozen or more images that take the place of traditional album art. These files require special software to play. Because it is not in wide distribution, analysts say the MPEG-4 audio format is unlikely to catch on anytime soon. One reason for the slow rollout is potentially steep royalty fees that developers must pay. The terms of licences and the payments that patent holders will ultimately demand have not yet been settled, however. "Unless patent holders start to relax [their hold on the format]", free audio technologies such as Ogg Vorbis or more established formats like Microsoft's Windows Media are more likely to win wide usage, said Forrester Research analyst Eric Scheirer, who worked on the MPEG-4 standards before joining the research firm. In Hollywood and in advertising circles, content developers are just beginning to wrap their minds around what the technology can do to change video. George Linardos is head of the new media division of HSI Productions, which has created some of the biggest music videos and commercials of the last few years, including those for Madonna, Eminem, Jennifer Lopez and Destiny's Child, as well as ads for Nike and Reebok. He's working with start-up iVast to explore what MPEG-4 can do for videos and advertisements online, or even on the television through the interactive TV set-top boxes being planned by cable and consumer-electronics companies. "We're not too sure where everything in music video is going," Linardos said. "But there are things we're looking at, such as how to make a video a more immersive experience." iVast, which is building a set of tools to create MPEG-4 content and put it online, is one of several companies that has started working with some of the big Hollywood production companies and studios. "They speak our language," Linardos said, contrasting the start-up's demeanor with the "inflexibility" of many technology companies. The studios are interested in replicating much of what has happened with DVDs, where extra footage or directors' comments are often available, iVast CEO Elliot Broadwin says. The interest was recently enough to draw $25m in funding to his software company, even in the midst of a venture capital drought. The interactivity of the video does open up potential to do far more than just point and click at links on the screen. Individual elements of the video -- a character, a ball in a sporting event, a rocket ship in a science-fiction epic -- can exist in a separate "layer" from the rest of the video. This could allow viewers to interact with these elements somehow, even changing the direction of the story. Alternately, a company could provide access to only part of the video of a sporting event -- for example, showing only the ball or certain players if a subscriber paid to "unlock" the content. But this piece of the technology is a long way away and may never arrive, analysts say. It would require different ways of storytelling in studios and would require the technology to be incorporated early in the production process. "There are major technical challenges," said Forrester's Scheirer. For now, there is not good technology that can automatically encode video into these interactive "objects," he said. Nevertheless, MPEG-4 is being touted as an alternative to Microsoft's growing push into the media world. Even if it doesn't find its way onto many consumer Web sites, it is likely to be adopted by video and broadcast companies that have traditionally looked for standards-based technologies to use inside their own networks. These companies like having multiple technology providers -- as opposed to simply Microsoft, for example -- to ensure they can get the best prices on technology, say companies who serve this market. "If you're disappointed in a vendor, you can turn around and fire them without them calling you back and saying, 'OK, now this is your new licence price,'" said Alexander Hoag, chief operating officer of Envivio, a start-up that has produced MPEG-4 video encoders and players. Consumer-electronics giant Philips is one of the biggest backers of the technology. It's created its own line of MPEG-4 streaming media software and recently bought an Israeli start-up that will help create tools for creating the interactive video, which are still sorely lacking. "Cable operators and now telephone companies...historically have adopted standards," said Ahmad Ouri, general manager of Philips' MP4Net division. "We believe those companies will be looking for standards to deploy" in the future too, he said. As might be expected, Microsoft is not bullish on the technology, even though it played a large role in the initial standards discussions. The software giant does support MPEG-4 playback in the newest version of its media player software, but says its own proprietary video-compression technology is better. "We think MPEG-4 is not a very good compression engine," said Amir Majidimehr, general manager of Microsoft's Digital Media Everywhere division. 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