[TenaciousValor]

>Maybe we need to design new audio/video formats that degrade more "artistically" when there is data loss or insufficient bandwidth.

If "art is in the eye of the beholder," then an artistic decomposition would provide inconsistent results across populations. It seems more important that the data decompose in a more repeatable and reliable way.

Idea: create a transmission format which creates specific artifacts only in the presence of certain types of interference or failure modes. The format would likely need to created on a situational basis. It seems likely that this has been created, but I've never heard of something like it.

>Is there an encoding that would naturally produce smoothed visuals without sufficient data?

You might enjoy the results of wavelet compression [1]. An image format using wavelet compression is JPEG2000 [2].

[1] https://image.slidesharecdn.com/sjbit-ncp-2013-140401124704-... [2] https://en.wikipedia.org/wiki/Wavelet_transform#Wavelet_comp...