It is happenning on Home network as well as Remote when quality settings (both at Recommended/Maximum) are such as your content can be Direct Played.
I watch an episode and it’s Direct Played. It’s shown as such in the player in Playback Settings (Play Original Quality), in Playback Info (Direct Play), and in the server Dashboard (Direct Play):
Now I activate Automatically adjust quality option aka Auto Quality and start the same episode in exactly the same environnement and with the same options.
It’s still Direct Played. Shown as such in the player in Playback Info, in the server Dashboard:
I can also see my CPU and GPU are mostly idle.
But in Playback Settings the playback is displayed as Convert Automatically : Now 1080p, 5.4 Mbps.
Maybe I misunderstood this support article regarding Auto Quality or maybe it isn’t up to date, but according to this:
Play Smaller Videos at Original Quality : When the original video file’s quality (bit rate) is less than the quality that you’ve selected for Internet Streaming, Plex will try to play the original video without converting (transcoding). In that case, auto quality will not be used. Once a video starts at original quality, it will stay at original quality during playback. This preserves the full quality, but playback may pause frequently if your connection becomes slow.
To temporarily disable this for a specific video, open the Playback Settings inside of the video player and choose Convert instead of Play Original Quality.
Some apps can show details about the current quality during playback. In the web, iOS, or Android mobile apps:
While playing a video, tap ... (on iOS), the gear icon (on Android mobile), or the playback settings app (Web) in the lower right corner of the app
Choose Playback Settings and then Quality
When auto quality is being used, you should see something like Convert Automatically (Now: 1.5 Mbps, 480p) displayed. This indicates the quality being played at the moment. In this example, auto quality is playing 480p.
The Plex apps only select auto quality in situations where a video already needs to be converted (transcoded) for playback. It does not interfere with playing videos at their original quality (sometimes called Direct Play or Direct Stream).
Auto quality is only used when the video is being converted (transcoded). If a video starts with Play Original Quality, also known as Direct Play or Direct Stream, it will not automatically change quality based on connection speed. Similarly, if a video starts with Convert Automatically, it will not automatically change to Play Original Quality.
All of this for me clearly states that when auto quality setting is enabled, Playback Settings > Quality should only show Convert Automatically : Now 1080p, 5.4 Mbps when “auto quality is being used at the moment” and show Play Original Quality when playback is Direct Played or Direct Streamed
Ok, got an answer for you. The “Convert Automatically” feature is designed to force a transcode so that the Automatic Bitrate adjustment feature can be enabled. So the video should have actually been transcoding like I see in my test. So what you see is not a bug. If the file wasn’t actually being transcoded, that would be the bug. Looking through your logs, I didn’t see the switch to transcode, I did see this in my logs. I’m not sure if you didn’t wait log enough for the logs to capture this info.
The part in the support article you sited is applicable if you enable the automatic adjustment setting in the app and then if the transcode happens naturally. Changing the setting during playback is like an override to force the automatic adjustment feature.