Something about the very concept turns them off, I think. “People don't just burst into song and dance with complete strangers at the drop of a hat!” Well no, they don't. Nor have they ever spoken in iambic pentameter (even in Shakespeare's time) or walked calmly away from an exploding building with ash falling around them in slow motion and their hair waving in the aftershock in an attractive manner. Hell, if we were to list everything in movies that doesn't happen the way it does in real life, we'd be here all night. Or we'd be writing TVTropes entries, in which case we'd be there all night. Movies are all about the art of making audiences believe the impossible, but for some reason lovers serenading each other with a heartfelt duet while the orchestra swells is one impossibility directors have deemed impossible to sell.
So they cheat, as best they can. Rob Marshall made the songs in Chicago take place in Roxie's imagination (a gimmick that actually worked because Chicago itself is built around a gimmick, that of telling a story within the confines of a vaudeville show). Tim Burton removed the chorus numbers from Sweeney Todd. Joel Schumacher had the cast of Phantom of the Opera speak several lyrical passages (and if you thought Charles Hart's lyrics were a bit awkward before, try hearing them recited by Emmy Rossum in a tone that suggests she's reading to a group of kindergartners). Anything they can think of to avoid dealing with the fact that, sooner or later, you're going to have a person belting their heart's desire out at the top of their lungs.
I think music videos are part of the problem, too. Not that there's anything wrong with them—but they're a fundamentally different medium. Music videos can tell the story of the song, or they can tell a completely different story, or they can just be some attractive images to look at while the song is playing. Which is fine, for about five minutes. But in a two hour movie, there had better be a very strong connection with what's happening on screen and the lyrics coming out of the singer's mouth; otherwise, the movie just stops dead for several minutes while the actors pose and sing. Chris Columbus' Rent is a notable offender here. Take the emotionally charged duet “What You Own.” This song takes place at a significant dramatic point in the musical: Roger and Marc are alone, miles apart, and trying to figure out what meaning (if any) there is in their lives. Yet rather than explore the thought processes and development of the characters, Columbus spends a good portion of time filming Roger standing against a Southwest landscape like something out of a Bon Jovi song. And when Marc decides he's not going to sell out (“Alexi? Marc./Call me a hypocrite/I need to finish my own film/I quit!”) he doesn't say the line to his would-be boss—he just shouts it from a rooftop. Come on, Columbus, would it have been that hard to have Marc say the line into a phone?
I think that's why I have such high hopes for Les Miserables right now: Tom Hooper seems to get it. By having his cast sing live, he shows that he understands what makes a musical work. The songs are not gimmicks, not interludes from the action, but a vital part in telling the story dramatically. What a novel idea.