>Why would someone ever take a 40Mbps (compressed) video and downsample it so it can be encoded at 400Kbps (compressed) but played back with nearly the same fidelity
Because you can just not downscale them and compress them in the frequency domain and encode them in 200Kbps? This is pretty obvious, seriously do you not understand what JPEG does? And why it doesn't do down sampling?
Do you seriously believe downscaling outperforms compressing in the frequency domain?
Yes, absolutely. Paychovisual encoding can only do so much within the constraints of H.264/265.
Throwing away 3/4 (half res) or 15/16 (quarter res) of the data, encoding to X bitrate and then decoding+upscaling looks far better than encoding to the same X bitrate with full resolution.
For high bitrate, native resolution will of course look better. For low bitrate, the way H.26? algorithms work end up turning high resolution into a blocky ringing mess to compensate, vs lower resolution where you can see the content, just fuzzily.
Go get Tears of Steel raw 4K video (Y4M I think it's called). Scale it down 4x and encode it with ffmpeg HEVC veryslow at CRF 30. Figure out the bitrate, then cheat - use two-pass veryslow HEVC encoding to get the best possible quality native resolution at the same bitrate as your 4x downscaled version. You're aiming for two files that are about the same size. Somehow I couldn't convince the codec to go low enough to match, so I had the low-res version about 60% of the high-res version filesize. Now go and play them both back at 4K with just whatever your native upscale is - bilinear, bicubic, maybe NVIDIA Shield with it's AI Upscaling.
Go do that, then tell me you honestly think the blocky, streaky, illegible 4K native looks better than the "soft" quarter-res version.
Scaling color data is a different technique than down sampling. Again, all I am saying is that for a very good reason you do not stream pixel data or compress movies by storing data that was down sampled.
Because you can just not downscale them and compress them in the frequency domain and encode them in 200Kbps? This is pretty obvious, seriously do you not understand what JPEG does? And why it doesn't do down sampling?
Do you seriously believe downscaling outperforms compressing in the frequency domain?