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Should I buy a hardware encoder like the Niagara 7500 or should I buy a really high end workstation and place encoder software on it?
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For live streaming conversion -- keyword being "live" -- there's really no way to avoid hardware if you're seeking high professional quality. High quality software solutions are mostly going to require after-the-fact conversion. Online live streaming is essentially the same as broadcasting, from the point of view of the video technology.
Technically speaking, there are some software solutions out there, but I would suggest that much of it is geared towards low-end consumer webcam quality, or "good enough" type quality (frame drops, deinterlacing issues, degraded audio/video quality, etc). I try to follow the trends of the broadcast industry (which now include web and mobile video), and I've not seen anything but hardware discussed in the past -- not from the broadcast industry.
Free software example:
http://www.adobe.com/products/flashm...hmediaencoder/
The 7500 uses SDI input -- do you need or want SDI input?
There are other options for appliances. Niagara has the 2120:
http://www.visiblelight.com/mall/pro....aspx?pid=1228
VBrick and Digital Rapids are two more I can think of off-hand, without pulling any magazines off the shelf.
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My boss would like me to look into purchasing equipment that will last us in the long run (at least run for 5-10 years).
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Honestly, in this era of video, you're going to be hard-pressed to find anything that will last 10 years, aside from physical delivered media. Something like DVD (maybe Blu-ray) has a guaranteed long-term presence in facilities, or even standardized broadcasting specs (DTV), but all bets are off when it comes to mobile and streaming. That tech is still in a high state of flux, from formats to encoding to delivery. They can't even agree on a format right now; while I'd like to think H.264 is the "winner" in that arena, several competing formats are making serious efforts to dethrone it (WebM and VP8, for example). Some of the big players like Google (Youtube) will have a say in that, too.
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If you do live streaming video, what is your workflow and equipment used?
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All of our work is non-live conversion, when it comes to streaming video. The source is a master file of some sort, a mezzanine format like MPEG, MXF, DV, AVCHD or ProRes. Do note, however, that I still have a good bit of knowledge in this area -- I just don't necessarily get to exercise that muscle very often. It's a costly process, and there's not a lot of demand for third-party services. Most users are going to be content producers, doing the work in-house, and will own their own gear.
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For instance right now (I think) the workflow we have is: camera to hardware encoder, hardware encoder to software encoder, software encoder to server, server to www, www to customer. All of our equipment is outdated (over 8 years old) which is why I am looking into purchasing new equipment.
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What is the format of video created by the current hardware encoder? Are we talking MPEG-2 here?
That sounds like a standard legacy process, or a standard process done on a low budget.
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If I purchase a hardware encoder, do I also need to buy software like Wowza or Flash Server? What's the difference?
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It really depends on your delivery method. Are you using a CDN like Edgecast or Akamai, or a streaming service like Ustream.tv or LiveStream, or are you running this from your own server? If your own server, then you'll need some sort of software to power the streaming service. Aside from having a stupid name, I don't really have an opinion on Wowza.