This is a regression issue broken in ‘M-69’ and below is the bisect info:
Good Build : 69.0.3493.0 (Revision : 575195)
Bad Build : 69.0.3494.0 (Revision : 575513)

(Note : Unable to narrow down the range using per-revision bisect, hence providing bisect using old script)

Narrow bisect URL :
https://chromium.googlesource.com/chromium/src/+log/27a4cd8f3d841335f7954b48e162084a19336d80..a297505ef3a05801e89294631da2bafc11012fd8

Suspecting : r575489

Jennifer@ : Could you please check whether this is caused with respect to your change, if not please help us in assigning it to the right owner.

Note : 
1. Will update Mac OS behaviour once the latest Mac Canary(#69.0.3494.0) becomes available.

Thank You..!

Update : 
1. Above issue is also observed in Mac(10.12.6, 10.13.1, 10.14) OS.
2. Same issue is not reproducible in Mac Touch bar(10.13.6) device.

Update: 

This issue can also be reproduced on following test URL's using latest Canary #69.0.3495.0 :

1. https://www.html5rocks.com/en/tutorials/video/basics/
2. http://techslides.com/sample-webm-ogg-and-mp4-video-files-for-html5

Kindly review an attached screen-cast for reference.

Deleted: PiP_Results.mp4 2.6 MB

	PiP_Results.mp4 2.6 MB View Download

As this is recent regression adding release blocker label for this issue.Please reduce priority or remove if not the case.

Thank You!

Acknowledged and on my radar. I would not block beta for the fix.

I can't reproduce this on trunk (Linux). Is this specific to Windows?

I see it on Windows and Mac.

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/439c480b40ce6b611b043a2f73c326813e1447e3

commit 439c480b40ce6b611b043a2f73c326813e1447e3
Author: Jennifer Apacible <apacible@chromium.org>
Date: Fri Aug 10 02:52:53 2018

[Picture in Picture] Avoid letterboxing when PiPing new videos.

Currently, switching between videos in Picture-in-Picture mode sometimes
causes letterboxing or pillarboxing, depending on the aspect ratio.

This will size the window to adhere to the updated aspect ratio rather
than immediately letterboxing the video.

Future polish to be done in follow up patches.

Bug:  864394 
Change-Id: Ie0956f2b42c46207cc4f8af371755eee76e5c3c3
Reviewed-on: https://chromium-review.googlesource.com/1157523
Reviewed-by: Mounir Lamouri <mlamouri@chromium.org>
Commit-Queue: apacible <apacible@chromium.org>
Cr-Commit-Position: refs/heads/master@{#582028}
[modify] https://crrev.com/439c480b40ce6b611b043a2f73c326813e1447e3/chrome/browser/ui/views/overlay/overlay_window_views.cc
[modify] https://crrev.com/439c480b40ce6b611b043a2f73c326813e1447e3/chrome/browser/ui/views/overlay/overlay_window_views.h

 Issue 872640  has been merged into this issue.

Update
------

Tested above issue in latest Canary build #70.0.3518.0 on Mac(10.12.6, 10.13.1 ,10.13.6, 10.14), Windows(7, 8, 8.1, 10) and Linux(14.04 LTS) OS and the issue is fixed. No black borders are observed around PiP video frame and it is working as intended. Kindly review an attached screen-cast for reference.

Thank you..!

Deleted: Canary_behaviour.mp4 1.9 MB

	Canary_behaviour.mp4 1.9 MB View Download

Requesting Merge to 69 as it's a UI polish requested by UX team. It should only impact the feature which is guarded by a Finch flag.

This bug requires manual review: M69 has already been promoted to the beta branch, so this requires manual review
Please contact the milestone owner if you have questions.
Owners: amineer@(Android), kariahda@(iOS), cindyb@(ChromeOS), govind@(Desktop)

For more details visit https://www.chromium.org/issue-tracking/autotriage - Your friendly Sheriffbot

Approving merge to M69 branch 3497 based on comment #10 and #12. Please merge ASAP. Thank you.

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/7d541ae45e6e643a84ac100a4c6046753341fc69

commit 7d541ae45e6e643a84ac100a4c6046753341fc69
Author: Jennifer Apacible <apacible@chromium.org>
Date: Mon Aug 13 19:41:01 2018

[Picture in Picture] Avoid letterboxing when PiPing new videos.

Currently, switching between videos in Picture-in-Picture mode sometimes
causes letterboxing or pillarboxing, depending on the aspect ratio.

This will size the window to adhere to the updated aspect ratio rather
than immediately letterboxing the video.

Future polish to be done in follow up patches.

Bug:  864394 
Change-Id: Ie0956f2b42c46207cc4f8af371755eee76e5c3c3
Reviewed-on: https://chromium-review.googlesource.com/1157523
Reviewed-by: Mounir Lamouri <mlamouri@chromium.org>
Commit-Queue: apacible <apacible@chromium.org>
Cr-Original-Commit-Position: refs/heads/master@{#582028}(cherry picked from commit 439c480b40ce6b611b043a2f73c326813e1447e3)
Reviewed-on: https://chromium-review.googlesource.com/1173133
Cr-Commit-Position: refs/branch-heads/3497@{#577}
Cr-Branched-From: 271eaf50594eb818c9295dc78d364aea18c82ea8-refs/heads/master@{#576753}
[modify] https://crrev.com/7d541ae45e6e643a84ac100a4c6046753341fc69/chrome/browser/ui/views/overlay/overlay_window_views.cc
[modify] https://crrev.com/7d541ae45e6e643a84ac100a4c6046753341fc69/chrome/browser/ui/views/overlay/overlay_window_views.h

Update :
---------
Tested above issue in latest Beta build #69.0.3497.42 on Mac(10.12.6, 10.13.1 ,10.13.6, 10.14), Windows (7, 8, 8.1, 10) and Linux(14.04 LTS) OS and the issue is fixed. 
Now, no black borders are seen around PiP video frame, hence adding TE-Verified labels. Kindly review an attached screen-cast for reference.

Note : In M-69 branch builds, we need to enable "#enable-surfaces-for-videos" and "#enable-picture-in-picture" flags from chrome://flags page to test this feature.

Thank you..!

Deleted: Beta_build_behaviour.mp4 1.6 MB

	Beta_build_behaviour.mp4 1.6 MB View Download