That’s correct. If your client cannot deal with some of your media and transcoding is disabled, you’ll simply get an error message (though I suppose Plex could distinguish their error messages between transcoding being disabled vs. the server not being powerful enough).
I am having the same issue as everyone here. Sometimes, removing/not showing subtitles „fix“ the issue and let the video play.
How did you guys found the installer to downgrade? Apparently, on the plex.tv one can only download the latest version (which is exactly the one with issue).
I hope PLEX fix this mess ASAP. I am already thinking in using other servers.
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