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It looks like transcoding may be a thing of the past for perfectly legal downloaded movie files on consoles.
DivX and XviD are coming to the PlayStation 3 in an upcoming firmware update. This means that users will be able to watch their videos without 3rd-party solutions like TVersity.
There are also heavy rumors of similar compatibility coming to the Xbox 360 and TheFeed is guessing they are true. As much as we love Transcode360, native support would be aces.
Look for this soon on your console of choice. Then we can all argue about which console plays the video better.