If you just buy your video content legally then it won't be in the .avi format and you won't need to buy an app to play it at all.
BS. Ever heard of video cameras and shooting home videos? Up to 2005-2006, AVI was the most widely used video format. The vast majority of my (digitzed) home videos are in AVI too. Am I too a pirate?
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Guys, I've posted a major update on the new versions of four players running on the iPhone 5: https://forums.macrumors.com/showthread.php?p=16321816
Some of those players (e.g., It's Playing) has been mentioned here. The article discusses AC-3 drop very thoroughly and even points out that MoliPlayer still supports it.
The article, as with most of my other articles here at MR, is certainly worth checking out.