My solution was to import a .avi file with embedded alpha channel.
Then right click on the icon in tray and select “create media texture”
Create BSP brush, a box in your map.
Just click to select texture and drag it onto the surface.
Material is created.
Double click on material icon in tray and blueprint of material comes up.
Click to select material.
Left side, select “masked”
The alpha from the .avi can now be connected.
Works fine.
