

You will be forced to convert it to the older (and less efficient) H.264 format. HEVC or perhaps VP9, and that is what Vegas can't handle. My guess is that the video format is H.265 (x265) aka. Likewise, the audio format will be shown under 'Codec' for Stream 1. You will see the video format listed under 'Codec' for Stream 0.

Load the video in VLC and press Ctrl+J (or click Codec > Settings). However, if editing in format-restricted software like Sony Vegas is important, you should first check the video and audio format of your file. It only takes a few seconds, because audio and video streams are simply copied. What he does is called remuxing or rewrapping. Your friend does it right, because there is no need to convert (transcode) anything, if the only goal is to change the video container (aka file) format from Matroska to MP4.
