This is because when you do split screen on a widescreen TV, you get an aspect ratio of 16:4.5, which is totally f***d because of how stretched the picture gets. And splitting the screen vertically gets way too narrow. So they make it 4:3 then split it so the picture isn't horribly distorted and stretched.
Keep in mind, this is only during SPLIT SCREEN multiplayer on a 16:9 TV. (if you have 2 people playing on one Xbox) This won't happen any other time
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