I like the site. Very nice job. I don't know how big your market it is. It appears to be targeted at developers, but we are the ones most likely to roll our own solution to this type of thing. I think I would be more apt to want to buy a one time license and run the software myself, then to commit to a monthly service fee.When you're launching a startup where video encoding is one of the core component you don't really have the time to roll your own solution.
Doing an automated solution to encode videos is not easy and it takes time.
Having easy and cheap solutions like this make you gain valuable time in the early stage and even later.
Perhaps you should looking at a consumer market where you would do the work and then host it yourself for them giving them a link, or publish it to a subset of popular sites (facebook, flickr, youtube, wordpress, etc.)
Thats exactly what Particles do, they have two services ; one for encoding (heywatch) and the second one spread the videos to multiple services and provide analytics (Heyspread).