The brightness dynamic range outside on a sunny day is 1,000,000,000:1. We’re able to see approx 15,000:1. Your monitor is around 700:1 to 1000:1. So that original waveform there on the left sure is chucking away a lot of useful information! It’s using just over half of the dynamic range of an 8-bit signal – not at all how it would look if you’re really there, or even if you took a picture of that scene with your phone camera.
Photorealism is about mimicking reality. Reality has a massive dynamic range. If you’re going for photorealism, you need to spend all that limited 9.5 stops of dynamic range that this monitor you’re looking at can do, otherwise it’s going to look washed, like old film, or a heavy Instagram effect. Spend the signal to the limits.
Here’s another frame with some hot sun hitting the rocks as well as deep shadow values on the left. In real life, the dynamic range would be in the hundreds of thousands to one. Your DSLR camera shooting RAW would capture 20,000:1 or around 14 stops of dynamic range. You could tone map / color correct it into into the display space of 700:1 or about 9.5 stops of dynamic range for a nice punchy image which looks photorealistic, obviously.
In this frame, just a little over half of the dynamic range in a standard video signal is used. There’s bright sun reflections and dark shadows, so it should be higher than that. The highlights aren’t bright, the shadows aren’t dark.