The main reason is the encoding issue, like with audio. We have to dual encode all audio formats because petty arguments by browser makers mean they can't agree on one format that works everywhere. However at least audio is relatively simple to convert. There are good free tools that we've taken advantage of, and encoding is relatively simple (generally you just set a bitrate and go).
With video it seems to get a lot more complicated. Again there needs to be two formats encoded to support all browsers: Theora or WebM and H.264. However I've found it hard to find good tools that are definitely legal to use in commercial software, and can decode a decent variety of video formats. For example ffmpeg looks like the best candidate for an encoder, but they admit on their own website if you use it in a commercial product some companies may come after you for licensing fees. And in audio, 16-bit PCM .wavs are basically guaranteed to be decodable by anything. What's the same format for video though? Will .avi actually work with all encoders? I must admit I don't know much about video processing - does anyone even still use .avi? It's a lot less convenient to use uncompressed video than it is to use uncompressed audio, since uncompressed video files are truly gigantic. So I'm not even sure if dual encoding will be useful, if it can only definitely encode a ridiculously impractical format like .avi to both necessary formats. If anyone out there is a video expert, I would appreciate some tips on how to solve this.
You can always encode the video files yourself if you know what you're doing, and then I believe there's a third party plugin that can play videos too.