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1080 video imported into a 720 timeline is blurry

Update:11-30Source: network consolidation
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I am using CS5 and I am trying to import 1080 video into a 720 timeline.  When the video is played it appears out of focus.  When it is not being played it is sharp.  What is going on here?  Am I missing some sort of a conversion step along the way?

The Best Answer

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Try putting it in a 1080 sequence and nest it into the 720 sequence.