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We encode all the scenes on lightspeedtv.com in multiple formats, including Ipod. I don't think it is the reason surfers are buying memberships, but its an extra feature that we provide that saves them the time and trouble of encoding it themselves. We track the downloads, right now about 5-6% of our users are downloading the Ipod files.
I've put a few movies on my ipod, and watched them on a hotel tv using the video-out mode. The quality is decent enough that its like a portable dvd/cd player.
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Abra-cadabra!
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