Which one's better? I.e., which one yields better quality?
If I encode a video using h.264 baseline 1.3 at 320x240 at 768 kbps and then use the same settings for Ipod-compatible MPEG-4, which video will have better quality? Now what if I use baseline 3.0 640x480 at 1500 kbps vs. the same for MPEG-4?
Also, will the output files be the same size if I use the same bitrate or will the MPEG-4 one be either larger or smaller than the h.264 ones?
So my question is really: Is there any point to using MPEG-4 for the iPod when you don't need to go higher than 1500?
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Just create small sample files using various settings and see which looks best to you. Increasing the resolution larger than the iPod can display, won't make the image look any better. Use the specs of the iPod as a guide, increasing anything (resolution/bitrate/fps) higher than the ipod can read/display will just be a waste of space (files will get larger).
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