The next generation of ATRAC after ATRAC1, ATRAC2 was developed (a single-chip stereo encoder/decoder LSI was developed) but never actually implemented in an MD music recorder product. MD-Data was chosen as the format for ATRAC2, due to the need for greater compression in MD-Data applications. Technically, ATRAC2 differs quite substantially from ATRAC1 on several points:

Sources: MDLP FAQ - ATRAC2 Information Page -