Does that keep the bitrate quality for the people watching on stream?
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No its transcoded to multiple variants like 1080p 720p etc same as twitch.tv or youtube. AV1 playback isnt really supported yet afaik in HLS, technically it cant work, but i didnt test it yet.
On zap.stream backend we use fMP4 so its possible to encode to AV1 in MP4 container but like i said, not tested.