What did happen exactly? The desktop is still not playing Html5 video, Flash is still used. I still can't go fully with Html5 on YouTube.
On Android mobile phones, Firefox had a rough time not because of Html5 video, but because they were slow to develop a usable version. The first versions I tried were very unstable and ate too much memory compared to the stock browser. But you know, it's evolving and on Android right now I think it's better than Chrome, minus one or two annoyances. Plus, they took the pragmatic approach, as they fall-back on the operating system's support for H.264 - remember open-source projects cannot bundle H.264 by themselves. Chrome is not open-source, while Chromium is and Chromium does not come with H.264 (although you can make it work on Ubuntu at least by installing the necessary code packages).
How is Html5 video related in any way with Firefox's marketshare?
> Years later, Webkit-based browsers are ubiquitous, and Mozilla is developing a phone OS nobody will care about
You're probably speaking about mobile web browsers. People here forget how big the desktop is and it's not going anywhere. And the WebKit browsers you're talking about are incompatible with each other. As for Firefox OS - personally I care about it, because it's tackling a market that has been ignored by both iOS and Android and because it leads the way to new Web APIs. So there you have it - you can't say that nobody cares about it, when clearly I do.
> Mozilla ought to spare itself another embarrassment by being the only guys in the room with the contrarian opinion
Maybe you should spare yourself the embarrassment of not recognizing that Mozilla made the web better precisely because of its contrarian opinion.