Video quality
Unfortunately, the excellent streaming performance is offset by a drawback that's more the fault of iTunes than Apple TV: Generally disappointing video quality. Movies and TV shows in iTunes are currently available in what Apple calls "near-DVD quality"--a maximum of 640 x 480. Perhaps "bad analog cable quality" would be more descriptive--all of the videos were quite soft, lacking the sort of fine detail we've come to expect from well-mastered DVDs.
But the resolution isn't the full story: We found the quality to be very uneven across our cross-section of sample videos. The "Phyllis' Wedding" episode of The Office looked pretty good--no complaints for a 247MB file that cost us a mere US$2. But Lost looked pretty chunky--square MPEG artifacts were clearly visible in the lush jungle scenes. Galactica looked even worse--the dark corridors and exterior space battles found in "Resurrection Ship, Part 2" were muddy to the point of distraction. The movies were somewhat better, but even nonvideophiles could pick out a litany of problems: Wes Anderson's repeated panning shots in The Royal Tenenbaums showed considerably more frame judder than you'd see on DVD, and the various details of the family house--crowded bookcases and wood paneling--were often submerged in splotches of black and brown with no detail. Similarly, false contouring artifacts were in evidence on the brick walls of the rooftop scene in the first chapter of The Incredibles, as well as on Jack-Jack's head during the family dinner scene. The streaming movie trailers were worst of all: 300, Grindhouse, and Zodiac were all a mess--but they were freebies and streaming straight off the Web, so we were far more forgiving.
In other words, the video quality on the Apple TV wasn't that different from what we found on products such as the MovieBeam and the RCA Akimbo Player. Likewise, especially when blown up on a big-screen (42 inches or larger) television, Apple TV videos were a step down from what you'd see on a S$50 (US$35.00) DVD player.
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