In this paper, network hosted transcoding is studied for the optimization of resources in multicast applications. The configuration is as follows: one source node is sending a signal (e.g. a video stream) and several destinations request that signal but at a bit rate adjusted to their access link. Instead of transcoding at the source node, the nodes inside the network will take care of the reduction in bit rate. The advantages are that the source load and overall bandwidth usage are reduced while end-users get the service at a customized quality. The focus of this paper is on the calculation of the optimal multicast tree, including transcoding location optimization and estimation of the resource usage gain.