I haven't said much yet about the ability to rent or buy videos at the iTunes Store, via the iTunes application on your Mac or PC, as opposed to your web browser. The iTunes Store offers video content for iPhones and iPods, for the Apple TV, and for play on your desktop in iTunes.
I recently rented the 1958 classic horror flick The Fly at Amazon and iTunes and compared the quality of the video with that at Netflix. All these are standard-def versions.
Here is how a particularly useful frame of the movie looks in the Netflix version:

In the iTunes version:

And in the Amazon version:

To see what the differences are, you'll need to click on each of these images to enlarge them in your browser window. The best way to do that is to open each in a new tab in the same browser window, then click on each tab in turn to note the rather obvious differences.
First, rapidly alternate between the Netflix and Amazon versions. They're similar in frame size, but the Netflix covers just a tad more of the original 2.35:1 CinemaScope film frame — compare especially the amount of the grid of the depicted window screen that you can see at the left edge of the picture.
The Netflix image is also sharper. Look at the Roman numeral date MCMLVIII in both images. It's a little more legible in the Netflix than in the Amazon.
Now switch to the iTunes version. The MCMLVIII is downright blurry. The frame is stretched vertically to yield a subtly incorrect picture geometry. The left edge of the picture reveals less of the depicted screen than the Netflix version does — about as much as the Amazon version does. Also, the iTunes version looks duller and darker; the reddish brown background color isn't as vibrant.
In other words, the iTunes image is geared to the low available resolution and nonstandard aspect ratio of an iPhone/iPod screen. The subtle vertical stretching allows the image to use more of the mobile device's limited screen area than would otherwise be the case, given that (nearly) the entire width of the original (extremely wide) film frame is being shown.
Most users probably prefer the slight geometric distortion to having wider black bars at the top and bottom of the iPhone/iPod screen, so this is a compromise that makes some sense. However, if you are watching on a big computer monitor, the soft, stretched image looks pretty bad when compared, in full-screen mode on the same monitor, with the Netflix version — which, after all, is free to anyone with a Netflix-ready TV setup and a standard Netflix account.
Meanwhile, the Amazon version is just a tick inferior to the Netflix version, and far preferable to the iTunes version on any reasonably large screen. If you lack a Netflix-ready setup but have one that is Amazon-ready, you will lose little in terms of video quality (though you will have to pay for each rental or purchase).
Strictly speaking, this comparison applies only to this one movie; it may be that Amazon is better than Netflix for other titles. However, I think it likely that iTunes will be generally unable to match either Netflix or Amazon in terms of video quality, simply because it targets iPhones/iPods first, and bigger, higher-resolution viewscreens second.
An exception: HD content. You can buy or rent certain titles in HD from an Apple TV, for use on the Apple TV. I'll deal with that in a subsequent post.
Another exception: standard-def videos from the iTunes Store, when rented directly from an Apple TV (see this Apple Support document). They can have up to 720x480-pixel widescreen resolution, while the same titles rented from a computer or iPhone/iTouch max out at 640x480. (I rented The Fly from my computer.)
This exception applies only to iTunes Store rentals of videos. iStore video purchases are stuck with 640x480 resolution, no matter what device you use to make the purchase. 720x480 supposedly won't play on an iPhone/iTouch, only on an Apple TV. If you bought a video on your Apple TV and later tried to move it to your iPhone, it wouldn't play ... and Apple doesn't want to deal with the customer complaints when that happens.
An aside for techies:
(The main part of the article is done. If you don't want to be bored by a raft of technical detail, you can stop reading now.)
640x480-pixel anamorphic resolution squeezes a 16:9 widescreen picture into a nominally 4:3 video frame that uses "square" pixels: the individual pixels are exactly as wide as they are tall. The decoder expands the frame again into its original 16:9 aspect ratio, a process that is relatively easy when the pixels are square. Of course, after the pixels are "unsqueezed," they're no longer square, but having square pixels prior to the unsqueezing allows the decoding to be done by a processor of quite limited power, such as is found in an iPhone/iTouch.
720x480-pixel anamorphic widescreen, unsqueezed to 16:9, has non-square pixels both for the input to the decoder and for the output, so the strain on processing capacity is much greater — too great for an iPhone/iTouch. But the Apple TV has (somewhat) greater processing capacity, so 720x480-pixel anamorphic widescreen input works with it.
There are other potential ways in which videos that work on an Apple TV can be incompatible with an iPhone/iTouch. For example, if a video has a bitrate of over 1,500 kbps, iPhone/iTouch won't touch it. iPhone/iTouch can't use videos encoded with bidirectionally predictive frames (B-frames), either. B-frames allow for more compact files and hold down transmitted bitrates. If B-frames were allowed, 1,500 kbps could yield a sharper, more artifact-free image.
But the iPhone/iTouch, because of its tiny, low-resolution screen, can't render any sharper and better images than it does. Plus, higher bitrates require larger memories and faster processors in a decoding device, while B-frames likewise tax the decoding processor and require the frames of displayed video to be held in memory after they have been displayed, "wasting" available memory space. Apple made the compromises that it did in order that the processor speed and memory size of the iPhone/iTouch could be held within reason.
Now, these considerations don't apply at all to Netflix video streaming, for the simple reason that the list of Netflix-ready devices includes no mobile or portable devices.
What about Amazon VOD? Again, Amazon's official list of ways to watch their videos conspicuously fails to mention mobile or portable devices.
In its earlier incarnation as Amazon Unbox, the Amazon VOD service supported Microsoft PlaysForSure portable devices. Those were non-PC devices that were certified by Microsoft to be able to play anything their Windows Media Player app could play on a real computer. PlaysForSure certification was rebranded as "Certified for Windows Vista" in 2007.
Meanwhile, Microsoft had come out with it's own iTouch competitor, the Zune portable media player — and Zune cannot play all PlaysForSure content!
Remind you of anything? Such as: the iPhone/iPod Touch can't play all the content an Apple TV can play (including HD content).
The message here is that it is as yet extremely difficult — nay, impossible — to stream highest-quality video content that "plays for sure" on all manner of devices that turn out to be price-competitive in a competitive, real-world marketplace.















