You will usually receive this error when the host computer does not meet the requirements for hosting a game using Parsec.
If the host machine's graphics card is listed as compatible for hosting with Parsec, then the host graphics card driver may need to be updated, or the host display may not be connected directly to the graphics card (in some gaming laptops for example).
First thing to try is turning off ShadowPlay if you're on an Nvidia card. It might steal resources from Parsec that prevent us from initializing your encoding hardware.
DOES YOUR GRAPHICS CARD SUPPORT HOSTING?
You need a supported graphics card in order to host a game with Parsec, check our compatibility list here.
Check out this article for a potential solution when the host is a gaming laptop and you have both an NVIDIA and Intel graphics card.
You should make sure your integrated GPU is disabled in Device Manager or in your BIOS
MULTIPLE GRAPHICS CARDS OR MULTIPLE SCREENS?
If you're on a computer with multiple monitors or multiple graphics cards, you need to make sure the monitor you want to stream is directly connected to the graphics card you're running the game on.
In the host tab of your settings page, you can select which monitor you want to stream, and underneath the monitor name it will show what graphics card it is connected to.
CLOUD MACHINES PURCHASED FROM PARSECGAMING.COM
You likely updated the graphics driver incorrectly and broke the machine, you will need to delete this machine and recreate a new machine to repair this problem.
If this happens every time you create a brand new cloud machine, or you never updated your graphics drivers on the cloud machine, or you have some stuff on the machine you can't afford to lose, you can create a support ticket here and we will do our best to fix it, but it may take 24 hours.
CLOUD MACHINES PURCHASED FROM OTHER PROVIDERS
If you're either attempting to use a instance type that doesn't include GPU/hardware encoder support, or your GPU drivers are not correctly installed.