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What happens if you set your Apple TV hosting device to use Ad Guard DNS, or your local LAN router to use the same?

https://adguard-dns.io/en/public-dns.html

DNS level blocking doesn’t work for YouTube as far as I know.

Will not work, yt is sending requests through https. The only way, as I saw recently would be a script that decodes https and Google's encoded objects and sets some flags to true, making yt believe you have premium or altering them in a way that will make the ad request invalid

It has nothing to do with HTTPS, it's just that ads are served from the same domain.

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