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Previous works showed that the quality-of-service (QoS) requirements of multimedia applications can be optimally satisfied by pipeline forwarding (PF) by providing end-to-end delay guarantees as well as high network resource utilization. However, the unavoidable mismatch between reserved resources and the unpredictable traffic profile of a video stream has an impact on the resulting application layer quality. Therefore, a new low-complexity H.264 video encoding and packetization scheme based on a distortion-optimized macroblock grouping technique is designed here to maximize the performance of video transmission on PF networks. The scheme considers the perceptual importance of the different parts of the video data to group the most important information in few packets that are the natural candidates to receive the deterministic service provided by PF. Results show peak signal-to-noise ratio (PSNR) gains up to 2.5 dB over traditional video encoding and packetization schemes, as well as more graceful degradation in case of high network load.