Doing the transcodes is pretty much a drop in the bucket for NetFlix. Even transcoding the same movie 1000x at full length is pretty meaningless to them since i

Doing the transcodes is pretty much a drop in the bucket for NetFlix. Even transcoding the same movie 1000x at full length is pretty meaningless to them since it is a fixed cost against their library size. What they really care about is things that are multiplied by the number of users they have. Saving 5% of bandwidth on 100k users is very meaningful to them. So doing extra transcodes to figure out what to send is very valuable. They've come and given talks at Cloud dev meetups and just an unexpected bump in bandwidth or delay in server response time causing traffic to back up is enough to knock over their servers and they do things no one else would even think of, like having their clients upload code to their servers to batch requests together in the optimal format for the clients, just to reduce bandwidth and load on their network.