A method is provided for encoding a digital video to improve perceptual quality. The method includes receiving a digital video at a video encoder, providing a perceptual quantizer function defined by PQ ⁡ ( L ) = ( c 1 + c 2 ⁢ L m 1 1 + c 3 ⁢ L m 1 ) m 2 , wherein L is a luminance value, c1, c2, c3, and m1 are parameters with fixed values, and m2 is a parameter with a variable value, adapting the perceptual quantizer function by adjusting the value of the m2 parameter based on different luminance value ranges found within a coding level of the digital video, encoding the digital video into a bitstream using, in part, the perceptual quantizer function, transmitting the bitstream to a decoder, and transmitting the value of the m2 parameter to the decoder for each luminance value range in the coding level.