As I understand it (imperfectly at best) the reduction in quality is due to the individual threads not sharing information with each other and when they get too high they are all working on such a small section that this lack of information starts to become significant. Exactly what "information" they are not sharing I don't know but I think it is some aspect of the results from each thread.
I think the auto threads was designed a while ago and with more normal systems in mind, with a multiprocessor many core system I suggest you set threads manually if you want quality over speed.
@detmek
Which resolution was that clip? I believe the higher the resolution the less threads have an impact on quality.
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