An advanced video multiplexer system designed and optimized for next generation on-demand video distribution is described. The system optimizes identifies a multi-program transport stream best able to accommodate new sessions based upon Quality of Service (QoS) and QAM utilization ratios. MPTS channels are rebalanced via re-grouping and transrating as necessary to optimize bandwidth utilization. Multiple video formats are supported via built-in transcoding. The multiplexer manages encryption resources and supports new sessions using previously allocated encryption resources where possible. Sessions can be grouped into encryption channels either by using a single authorization tier per channel policy, or by requiring all clients of the group to be in physically separated service groups. Encryption channels can be released when a channel no longer serves any clients or when one or more other channels that have been assigned the same entitlement can accommodate any remaining clients.