It didn't? Then how are they getting the streamed bits directly? Since there's generally a torrent available that is the direct source, no re-encoding.
Or do you mean they read the source from hacking into a memory buffer after the player does decryption but before decoding, instead of doing the decryption themselves?
I don't see how that would work with videos that don't have differeny original sources. For example, Netflix-original shows/movies. While a small fraction are released on DVD/Blu-ray, the vast majority are only accessible through Netflix, nowhere else.
Or do you mean they read the source from hacking into a memory buffer after the player does decryption but before decoding, instead of doing the decryption themselves?