As someone who worked until a couple of years ago in this field, I should point out that the larger area of value in the industry is the capacity to customize content for the consumer scenario (available bandwidth, CPU, resolution, available buffer size, CODEC support, etc.) and to do so automatically.
The notion of precomputing various versions of a piece of media is not a new one, nor a particularly valuable one, since consumers rarely know which option to select.
What users really need is something that perfectly matches their viewing scenario and their device (largely mobile). The knowledge of what works well on each device (with default settings) is the real gem here, and the capacity to deliver it ASAP (eg. transcoding in real time) is the service to supply.
There are far more codec options than you can shake a stick at, and they do affect playback quality - especially during higher and lower bitrate portions of the media, and especially on lower end mobile devices (essentially today's global internet access norm).
While the standard tool in this area is ffmpeg, one should note that not all of its algorithms can be parallelized, so real time delivery is a thornier problem than you might expect. Also, while there are device databases that can tell you resolution from an HTTP User Agent string, none of these will tell you CODEC support and functional bitrate limitations. The manufacturers, hastily throwing together devices from third party chip SDKs, often don't know these specs themselves.
Throw in subtitle stream rendering support and the corresponding font problems, and things get really fun really quickly.
Good luck to anyone in this area, I for one am glad to have left!