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I'm looking for software that would help to implement above described scenario. By automation i mean minimization of actions needed for that process. For example, it would be nice to run some daemon that will constantly look to some folders and convert videos with specific settings as soon as they appear there. Both input and output folders could be shared over network and be very convenient. Handbrake-CLI + inotify + some other custom (cron?) scripts may be a solution, but maybe somewhere exist a solution with such out-of-the-box functionality?

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Handbrake-CLI and inoticoming should be all you need. You'd run inoticoming something like:

inoticoming /my/drop/folder /my/script {} \;

The script would follow the general pattern of:

OUTPUT_FILE="${OUTDIR}/`basename \"${INPUT_FILE}\"`.mkv"
HANDBRAKE_OPIONS="-q 20 --keep-display-aspect"

# Wait for file to be closed
    lsof -n "${INPUT_FILE}" >/dev/null 2>/dev/null
    sleep 5
while [ ${FILE_STATUS} -eq 0 ];

# Process the file

Note that I haven't tested this, so it may require a little bit of tweaking.

If that particular model supports MKV then try that, otherwise I'm afraid I don't know. It would help people answer your question better if you tell us (edit the question) what the devices you're wanting to play the media on, and what other restrictions have have are.

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Thanks for response, that may do the thing, but just found out that since 0.9.4 Handbrake ditched avi/xvid support that prohibits its usage (i'm transcoding media files to play on portable devices, such as Cowon players that doesn't support mp4 container). Any ideas for alternatives that will encode mp4 -> avi without much pain? – Alcz May 31 '11 at 17:19

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