No they have not made it worse. 1080p encoded at lower bitrate can look better than 720p at a higher bitrate. Or vice versa. Even to the trained eye. It depends on the scene dynamics.* In the ladders they posted (called a RD chart) we can clearly see they have made a better selection of the resolution to encode at a given target bitrate increase the video quality. They have posted the BD rates for this stuff, the gains are substantial (30% or more visual quality at the same bitrate).
> Also, something that's kind of weird about all this is that encoders (x264, x265, etc) already have their own rate control algorithms that decide on a frame or scene basis how many bits to use. Netflix taking an approach like this is equivalent to claiming that they're capable of doing a better job than these codecs in an automated way - so why not just contribute the code needed to achieve these improvements back to the projects they're using?
Because they've built a split and stitch encoder on top of the codecs. That means the code is built around x264, not into it.
> Last, it's very weird to select individual frames from an encode and not a selection of frames. The comparisons purport to show that the lower bitrate encode is better than the higher bitrate encode, but in fact (if I understand how they're using rate control correctly) what they are showing is a single frame in the lower bitrate encode that uses more bits than the same frame in the higher bitrate encode. So it's arguably not a fair comparison. And even with that, depending on how sensitive you are to artifacts, some of the "optimized ladder" encodes still look worse.
This is extremely true.
* High action scenes tend to benefit from lower resolution with more bits spent on inter compression while slower scenes benefit from tighter intra compression.