You are missing out on why flash video became the dominant format for videos on the web. Flash has always had a very high install base on PCs (90+%), and back then videos where primarily real video, WMP or quicktime which required people to install the requisite software. This was obviously not a popular solution for end users that hate installing software to browse a website and video providers often had to provide said videos in all three formats.
Then Adobe come in and implement video support and develop a near instant 100% base for flash video. Requiring people to install codecs will lead to a similar issue, people hate installing extra crap, let alone extra crap thats going to cost money to use legally.