I and 2 other men are in the phase of making a video streaming site, and we've gotten to the uploading the files (.mp4, .avi, .wmv, etc etc) then converting it into something efficient. We are planning to use ffmpeg but our coder has a /problem/ with it, apparently companies are being sued.. we will be offering a premium membership, to stream 720p etc, but I was just wondering what you guys thought, and if the are any other better conversion softwares available. Thanks.

The lawsuits refer to the TWO licences that apply to FFmpeg, and it is in regard to distributing FFmpeg or compiling it in to your own distributable (free or paid) application or library.

Have a read at http://www.ffmpeg.org/legal.html