I get source error when I try to drop the resolution and quality too far.

I have hardware transcoding activated. Jellyfin is running on a docker container on ubuntu server. When I try to reduce the resolution and mbps too far I get source error. E.g. with a 2160p source file I can transcode to 1080p 20 mbps but if I try 720 or 1080 10mbps, source error happens. Is this a server side thing or a client side thing? How do I fix this?