Multi-version video-on-demand (VoD) providers either store multiple versions of the same video or transcode video to multiple versions in real time to offer multiple-bitrate streaming services to heterogeneous clients. However, this could incur tremendous storage cost or transcoding computation cost. There have been some works regarding trading off between transcoding and storing whole videos, but they did not take into account video segmentation and internal popularity. As a result, they were not cost-efficient. This paper introduces video segmentation and proposes a segment-based storage and transcoding trade-off strategy for multi-version VoD systems in the cloud. First, we split each video into multiple segments depending on the video internal popularity. Second, we describe the transcoding relationships among versions using a transcoding weighted graph, which can be used to calculate the version-aware transcoding cost from one version to another. Third, we take the video segmentation, version-aware transcoding weighted graph, and video internal popularity into account to propose a storage and transcoding trade-off strategy, which stores multiple versions of popular segments and transcodes unpopular segments. We then formulate it as an optimization problem and present a heuristic divide-and-conquer algorithm to get an approximate optimal solution. Finally, we conduct extensive simulations to evaluate the solution; the results show that it can significantly lower the storage and transcoding cost of multi-version VoD systems.