Some picture quality loss occurs.
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Ideally the dropped lines should be evenly selected from the original 480 scan lines. Unfortunately some players drop two in a row here and there, and this can cause moving objects to flicker objectionably. The greater number of finer scan lines in HDTV means that stairstepping is less noticeable. When scan lines are dropped during downconversion, the slope of a diagonal line or edge becomes more shallow at that spot. Overall, what was once a straight diagonal line becomes a zigzag line of shallow, steep, shallow, steep short segments.