To use Local Playlist, you must be in Interactive mode.
The Local Playlist allows you to automatically update the playlist content on the players that reference that playlist. If you add a Local Playlist to your dynamic playlist in the center pane and double click on it, it will display the players in a group and their assigned playlist (see the image below). Select Specify playlist to assign certain players to play different presentations (in the image, one player is assigned to “Matt Local Playlist 1” while the other players in the group play the default playlist).
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