COMMENTARY: Why does the video in Blu-Ray-based HD movies suck so badly?

First of all, for those of you who missed it, the high-definition world is discovering in the first head-to-head disc-to-disc challenge between HD-DVD and Blu-Ray that HD-DVD’s picture quality has absolutely beat down Blu-Ray. 
HD-DVD and BluRay Compared Using Identical Source Material
"In our first head-to-head comparison, we found the HD DVD to be superior. The unfortunate cropping of the Blu-ray image, coupled with more noticeable compression artifacts and an overall darker cast, can’t compete with the more consistently pleasing presentation of the HD DVD … I must say, our first Blu-ray versus HD DVD comparisons continue to yield surprises. I wasn’t expecting to see much difference in video quality between the two formats with ‘Rumor Has It…’, yet the two discs did bear noticeable differences, with the HD DVD boasting better detail and a more film-like look."
The question people are asking is, "Why?"  Why has Sony apparently laid yet another goose egg along side BetaMax, Memory Stick, MiniDisc, UMD, and "ATRAC" (Like MP3 or Windows Media or Apple’s AAC, this is the audio format they use on Sony Connect, Sony’s proprietary music service… no, I didn’t think you’d heard of it.)
There are many reasons why HD-DVD is better consumer choice, but in the case of the mysterious video quality difference, the answer lies in the fact that the people at the controls of Blu-Ray decided that MPEG2 was a perfectly acceptable encoding format for high definition content.  You will recall that MPEG2 is what SD-DVD (Standard definition DVD’s) use for encoding the video stream.
Meanwhile, the folks helping the HD-DVD studios used VC-1, the documented version of the Windows Media Video 9 codec, and as a result the video quality is 100% demonstrably better to even the most unseasoned eye.  Remember that Windows Media Video 9 was created by Microsoft Research along with the Windows Media team – it’s a technological quantum leap relative to most other codecs.
"Rumor Has It…" was a movie available in both Blu-Ray & HD-DVD.  The HD-DVD version of the movie was a "flippable-DVD" meaning it provided the SD-DVD version on the opposite side or some other content, making only half the disc available for the high definition movie material.  In techie numbers, this meant that only 15GB was available for the HD-DVD content.  Compare this to the full 25GB of space that Blu-Ray had for it’s MPEG2 version being that it used the entire disc.  (Those of you that are confused should remember that contrary to the hype, Blu-Ray discs are going out to consumers as 25GB per disc.  The much ballyhooed 50GB per disc is not what consumers will have available to them when it comes to high definition movies – it’s too expensive and too hard to manufacture in quantity for something where the storage really isn’t necessary with codecs like VC-1 available)

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