Earlier quoted context omitted.
Sure, you can "improve compression" -- just compare yourself to an awful encoder! This is the strategy used by thousands of marketing whitepapers. But x264 isn't an awful one; it's the best, by a factor of ~30% over the nearest competition according to the most recent independent comparison ( http://www.compression.ru/video/codec_comparison/h264_2011/ ). Every company loves to claim that their "custom magic algorithm…
I can assure you that we did our testing against x264, and that we produced encodings that were better than x264. You're also assuming that compression optimization can only occur in the encoder - which I assure you is false (damn you NDA!! You'll have to take my word on these statements.) As to the business of selling said encoders, I couldn't agree with you more, if you've got something that improves the most widel…
Do you know you're not talking to some contractor, you're talking to the guy behind x264?
If you don't know him, read his analysis of VP8 (note copyright footer):
http://x264dev.multimedia.cx/archives/377
Having been in the streaming industry since the mid 90's, with heavy work in live and on demand encoding, I've seen dozens of these companies make similar claims, usually in pursuit of investment dollars. For years running, regardless of open source versus closed source, none stack up well against x264 when measured for the way people see video and for the resources taken to produce the encoded content.
You really don't have to read past the first graph:
http://compression.ru/video/codec_comparison/h264_2011/
This is an informative study, and has been for the last seven years. If you have a better compression that would let me, as a CDN, offer clients movie delivery to users with enough less bandwidth and storage it's worth retooling for, we're all ears. Again, I've talked to dozens upon dozens. None really had it. So far, given their original source, I could personally produce an even smaller x264 file that end users prefer.