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I disagree that they would put commercials before every clip. That is suicide. There are a number of sites that do that, and they have all lost market share because of it. If there is an alternative to commercials, and I'm sure there is, then Google will do it -- and I'm sure they have already figured it out.
From a user standpoint, I think you'll see the videos being degraded in quality far less than what YouTube currently does.
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