@Marco. Hi, is Overlay the same in all software, ? I've been Googling this because I use Gimp & -

orig image

Normal blend mode,

Overlay but the base image doesn't change where thee's alpha transparency,

In Vegas it's very different as in @marcusmc pic,

I don't have Photoshop but Google says -

Overlay is another of Photoshop's most Commonly Used Blending Modes. It uses Screen at half strength on colors brighter than 50% gray. And the Multiply at half strength on colors darker than 50% gray. 50% gray itself becomes transparent.

Without diving too deep into the math of compositing modes: Overlay is meant to make the base layer brighter where the top layer bright and to make the base layer darker where the top layer is dark. Only middle gray is meant to go through without a level change.

So what you see is expected behaviour.

To overlay text or transparent PNG you would not change the given composite mode of Source Alpha.

OK, thanks, I understand.

I might be a little confused, because that doesn't seem to work quite like the software I am used to. I thought I could overlay only the circle, like there are no dark areas or pixels around it.

Thanks again for taking the time to respond.

@Former user
The only difference probably is that Vegas Pro in Overlay mode simply disregards the alpha channel. It only calculates RGB then. Actually I think the only mode where Vegas Pro uses the alpha channel is "Source Alpha".

@Marco. Yeah it makes sense that Vegas is somehow inc the Alpha,

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Interesting that with nothing on track 1 it still darkens the image in Overlay..

It assumes empty tracks as R/G/B/A = 0/0/0/0. Because Alpha is 0, in default mode (Source Alpha) nothing happens. In other modes Alpha would be ignored (which, in your case, would make the output completely black if you use Multiply mode for the empty top track).

I think that if Vegas offered Compositing at the Event (object) level rather than the Track level, the Overlay and other modes would work the same as in Photoshop.

If one reduces the track size using Track Motion we can see that the Compositor affects the Track Alpha as well as the event image. I recall some debate about this on the old SCS forum.

FWIW, this is how it works in Photoshop (CS2). The Compositing only affects the circle, because that is its own Layer.

@Former user, @mark-y,
That's what I had in mind. That it would work as in any other photo or video editor.
This behaviour doesn't really make much sense to me, it comes with restrictions.

Here's the result in DaVinci Resolve:

Anyway, thank you everyone for your responses.
Have a good one.