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Foibbles said:

1. Bluray "standard" follows a set of rules so that the full benefits of the codec aren't used to get the best compression possible.

3. Codecs have advanced since bluray was released and the Xbox 360 has much more processing power than a normal bluray player to be able to use the advanced features of the codec.

4. Generally instead of h264 or MPEG4-AVC as it's often called, the Xbox 360 will be using the VC1 for encoding, this is highly optimised in certain low bitrate situations - it is an inferior codec at high bitrates however. Go check out some old HD-DVDs for example that use VC1. They manage to "cram" an entire movie on a 15GB disc with multiple audio streams and extras. This is with *older* implementations of the codec from a couple of years ago even.

6. The films on the service will mostly be NEW films that compress very well and don't need ridiculously high bitrates to look good because they are shot on digital cameras etc.

7. VC1 handles grain much better than h264 in any case.

Just some quick questions:

How does the bluray standard not allow you to use the features of VC1 or h.264 to their best extent?

How have either VC1 or h.264 advanced since they were released? Unless you mean encoding tools/practises. I know that h.265 is being worked on, but that is hardly applicable.

I always thought the "VC1 is better at lower bitrates"-thing was a myth, could you explain?

Point 6: It really depends on the source material, yes, but that goes for newer movies as well.

Point 7: This I'm almost completely sure is a myth. H.264 is a wider used format, which leads to more amateurs fucking up the video in the encoding process, but I can see no reason why it would be worse than VC1.