> 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.*

Well, of course that's correct. Take 1080p encoded at 100 Mbps and 720 encoded at 300 Mbps, I guarantee you that 1080p wins every time. :-)

> 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.

I understand how an RD chart works, but I disagree with your conclusions. Reread my original post carefully - my point is that if you're stuck with 1080p as the maximum resolution, than the quality you can get with the revised ladder is strictly worse, because Netflix will want to jump up to UHD resolutions, but your device won't support it. (And even assuming that the UHD will be better based on this chart is kind of a leap, because it depends on what artifacts you're most sensitive to. Objective metrics ≠ subjective experience. In several of their comparisons, I prefer the lower res version because the new one is simply too artifacted.)

> 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.

I understand the technical difference, but I'm still not convinced. Fundamentally what you get at the end of the day is a single continuous h.264 stream. The quantizer is chosen based on some rate control algorithm, and IPB frame choices are made by another algorithm. Netflix's improvement amounts to having a better rate control, that understands scene differences and uses lower quantizers on more complex scenes. There's fundamentally no reason why you couldn't add such a rate control algorithm to x264. It might require using a 2-pass mode, but it could be done.