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Performance bounds for generalized hybrid coding of video sequences with motion-compensating prediction are derived based on rate-distortion theory. It is shown that the spatial power spectrum of the motion-compensated prediction error can be calculated from the signal power spectrum and the displacement estimation error p.d.f.. A spatial Wiener filter can improve the efficiency of motion-compensating prediction. Memoryless encoding of the motion-compensated prediction error and intraframe encoding of the motion-compensated prediction error are compared. An evaluation of the rate-distortion functions for a typical videoconference sampling format shows that for integer pel accuracy of the displacement estimate the additional gain by motion-compensating prediction over pure intraframe coding is limited to ∼ 0.8 bits/sample in moving areas. Required accuracies of the displacement estimate for a gain of motion-compensating interframe coding over intraframe coding are given.