For the users, it is either this or no movie player for them. No movie player means a big product disadvantage compared to competitors, which is very bad for Google as a company.
The problem is not Google, it is DRM and DMCA.
The problem is not Google, it is DRM and DMCA.
Unfortunately, whilst you're not alone in your sentiment, the majority of users to whom Android devices are sold don't care either way, and those are the same users that make Google the most money.
Getting more Android devices into the hands of users now is important to Google: it increases developer appeal (growing the platform), which draws even more users (increasing advertising revenue). Having competitive, consumer-orientated features like this—that stack up against Apple (and Amazon)—are far more important to these goals than things like whether a device is rootable, themeable and/or side-loadable.
I feel this is akin to having a Windows PC that would disable Netflix streaming if you wanted to dual-boot your PC.
Android devices are the current generation of the previous Windows-era ecosystem. A bunch of clone hardware running slightly tweaked OEM versions of an OS.
The biggest difference, which consumers will really start to have issues with, is tying a software OS update to a hardware revision (If Dell prevented you from upgrading a Windows 98 machine to a Windows 2000 machine, not because of hardware limitations, but simply to generate more device sales).
It's more akin to having a Windows PC that would disable Windows Media DRM files if you had unsigned drivers loaded into the kernel. Which it does. This isn't without precedent, by any means.