Packetized video is likely to be one of the most significant users of bandwidth in future high-speed digital networks. In this paper we focus, in a unified manner, on the effects of packet losses, and the resulting error propagation, for a particular entropy-constrained subband coding (ECSBC) scheme employing hierarchical motion-compensated prediction (HMCP). We make use of the associated operational rate-distortion function to assess the quality of transmission that can be sustained under relatively low loss conditions representative of asynchronous transfer mode (ATM) networks. We show that the use of error-correcting codes helps in providing adequate protection for low-to-moderate packet loss. To capture the property of correlated loss in a network, a Markov chain model is used to represent packet losses.