Transcoding always happens server side, not client. If you have plex set to a bitrate lower than what the movie was encoded at it will transcode. By setting it to max the goal is to make it so no transcoding is required.
This will let you know if your network is the problem once you remove transcoding from the equation. Chances are your mkvs are not higher than 20mbps. There's an app called media info that will tell you.
But setting plex to a bitrate lower than the movie was encoded at will reduce image quality and result in transcoding.
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