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I am not too sure specifically what formats it supports but I know it DOES NOT support xvid or divx formats which is what virtually anything you download from the internet is encoded in.
Just an FYI AVI is actually a wrapper and not actually a video format. Kind of like if you were mailed a book. The cardboard box is the wrapper but the actual format of the media is a book. It came in the box, but your ability to read the book has nothing to do with the box. Same thing with AVIs. So you may have some AVI files that are encoded in mpeg1 format that will play on your 360, but other AVI files that use the xvid codec that WONT work on your 360.
If you are thinking about trying to convert your stuff, I would start at afterdawn.com. They have a lot of good video related tutorials there.
i'd think the only way this would work is through a media center pc but i could never get the retarded thing to work so i'm not sure. otherwise ya with the dashboard update converting shit to .wmv is the only option.. (borrow an xbox1? haha)
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Just an FYI AVI is actually a wrapper and not actually a video format. Kind of like if you were mailed a book. The cardboard box is the wrapper but the actual format of the media is a book. It came in the box, but your ability to read the book has nothing to do with the box. Same thing with AVIs. So you may have some AVI files that are encoded in mpeg1 format that will play on your 360, but other AVI files that use the xvid codec that WONT work on your 360.
If you are thinking about trying to convert your stuff, I would start at afterdawn.com. They have a lot of good video related tutorials there.
http://runtime360.com/