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I got a contact at google that I became friends with and I asked him about this. And he said they are going after sponsor hosted FLVs and the sites that are just fronts and 301 redirect based on category select. So basically, the legal tube clips, etc.
Google wants high user experience, and what my friend @ Google said means basically full movies, where the user will be happy. So in a way google is encouraging piracy in this area because users are only happy if they get long videos FREE.
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