Apple certainly could have made it easier to put any old video you want into iTunes, I think they made a strategic decision to coax people into purchasing video through iTunes by making it hard to just drop AVIs into it. If they had tried this with iTunes - come out with the music store before the player and limited you to only listening to music you bought through the store, they'd have been dead in the water. I'm sure they're more than happy with the sales of videos in iTunes but they certainly left a pretty wide hole where iTunes could have been the default video player for everything instead of just their own stuff.