In the RESUME project we explore the use of reconfigurable hardware for the design of portable multimedia systems by developing a scalable wavelet-based video codec. A scalable video codec provides the ability to produce a smaller video stream with reduced frame rate, resolution or image quality starting from the original encoded video stream with almost no additional computation. This is important for portable devices that have different Quality of Service (QoS) requirements and power restrictions. Conventional video codecs do not possess this property; reduced quality is obtained through the arduous process of decoding the encoded video stream and recoding it at a lower quality. Producing such a smaller stream has therefore a very high computational cost.In this article we present the results of our investigation into the hardware implementation of such a scalable video codec. In particular we found that the implementation of the entropy codec is a significant bottleneck. We present an alternative, hardware-friendly algorithm for entropy coding with superior data locality (both temporal and spatial), with a smaller memory footprint and superior compression while maintaining all required scalability properties.