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Here are some things to check:
1) -use-network=true Project - Properties - Flex Compiler - Additional compiler arguments, add -use-network=true
2) Verify that the relative paths to the video files are correct on the server.
3) Verify that you are displaying .flv files only, because VideoDisplay doesn't do .mpg, .mov, .avi, just .flv
4) Could be a timing issue. If the video is not streaming and its not loaded yet, black screen could be the result.
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Greg, there must be gremlins in my computer :-) Thanks for your resonse. Very helpful to check my sanity. It still has not resolved my problem. I do use use-network=true (though, I understand that it is the default option in Flex) and I am trying to play only flv. The relative paths are correct and I even added an event listener for the VideoEvent.ready to make sure that it is loaded (though it runs counter to the progressive download concept) and still not close.
If I play the same flv from the same location in a flash FLVPlayback component, it works flawlessly.
Try to run without using web server. if it works, then definitely you have to fix this issue for web server.