You have a great choice for streaming, when encoding a video and dropping it into MPEG-4. It is usually characterized by a choice at low bitrates over limited bandwidth and it can show great results under bandwidth and processor limitations.
There are a great number of containers for MPEG-4: well-known and always good like AVI, MOV and the raw transport stream (TS), which you will often have found dumped from your DVB hardware, as well as newer variants like MP4 and MKV. Your choice depends on the compatibility of your playback device, but encoding them shouldn’t be too difficult.
As for free tools – the only reliable one is the open source FFmpeg utility. You can use it to create MPEG-4 compatible files, although there are plenty of expensive commercial options available that may stick closer to the original specification.
When it comes to encoding, the main limiting factor is available bandwidth rather than playback hardware. You may want to stream video across a wireless-N network, for example, and while its specification may boast a transfer speed of 108Mbps, the results are seldom as fast as promised.
This means you need to find a compromise between resolution, bandwidth and quality that hits your bandwidth sweet spot, and unlike the limitless world of high definition, you’ll also need to compress the audio. The codec you choose will depend on the playback hardware, but the most common options is MP3 encoded through Lame.
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