One solution is to use DRM in conjunction with Flash Media Server (as mentioned by Stu).
Another option would be to stream content at runtime rather than caching the file system.
Finally, it is also possible to store the bits for the FLV in an encrypted local data store or SQLite database (which adds encryption support in AIR 1.5), however this probably won't work for large videos (performance issues), and you still have to record first it to the file system before playback (although temporarily).
microphone cameras
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