I think it has more to do with the fact that they aren't a multimedia company and the added costs of supporting a bunch of clueless individuals who can't seem to follow instructions correctly (or have absolutely no clue when it comes to media conversions, etc). Additional, unneeded support costs are some of the top reasons why certain companies don't expand their horizons and offerings. They are not a software company and have never claimed to be one (aside from their enterprise and OS offerings), with very few exceptions (Yahoo messenger, etc). They never issued guides on how to make WAV or MP3 files, or program MIDI files, etc., so why should they give that attention and luxury for video files? Just my opinion.
In the beginning the Universe was created. This has made a lot of people very angry and is widely regarded as a bad move.