A video encoder (200, 300) for encoding video signal data, the encoder characterized by: means for accessing at least one cross-fade picture disposed temporally between a fade-out start picture and a fade-in end picture in display order, wherein said fade-out start picture is a starting picture of said cross-fade and said fade-in end picture is an ending picture of said cross-fade, wherein said fade-out start picture and said fade-in end picture are encoded prior to said at least one cross-fade picture; a reference picture store (270, 370) for storing said fade-out start picture and said fade-in end picture as reference pictures for coding the at least one cross-fade picture; a reference picture weighting applicator (292, 392); and a reference picture weighting factor unit (272, 372) in signal communication with the reference picture weighting applicator for assigning weighting factors corresponding to each of the fade-out start picture and the fade-in end picture, respectively, for coding the at least one cross-fade picture, wherein a separate weighting factor for the currently encoded cross-fade picture is determined for each reference picture, characterized in that said reference picture weighting factor unit uses initial weighting factor estimates for the fade-out start picture and the fade-in end picture to perform motion estimation and to form motion compensated reference pictures, and subsequently refines said weighting factors based on said motion compensated reference pictures and the at least one cross-fade picture, wherein an initial weighing factor estimate corresponding to a reference picture is formed using the reference picture and the at least one cross-fade picture pixel values, wherein the motion estimation is performed between a current cross-fade picture and a weighted version of the reference picture, wherein motion vectors resulted from the motion estimation are applied to the reference picture to form the motion compensated reference picture that is unweighted to refine said weighting factors, wherein said motion vectors are applied to the weighted version of the reference picture to form a weighted motion compensated reference picture, wherein a difference measure between said weighted motion compensated reference picture and the current cross-fade picture is computed, and wherein said refinement is performed only if said difference measure is higher than a threshold or higher than a previous best difference measure. means for accessing at least one cross-fade picture disposed temporally between a fade-out start picture and a fade-in end picture in display order, wherein said fade-out start picture is a starting picture of said cross-fade and said fade-in end picture is an ending picture of said cross-fade, wherein said fade-out start picture and said fade-in end picture are encoded prior to said at least one cross-fade picture; a reference picture store (270, 370) for storing said fade-out start picture and said fade-in end picture as reference pictures for coding the at least one cross-fade picture; a reference picture weighting applicator (292, 392); and a reference picture weighting factor unit (272, 372) in signal communication with the reference picture weighting applicator for assigning weighting factors corresponding to each of the fade-out start picture and the fade-in end picture, respectively, for coding the at least one cross-fade picture,