I don't doubt it for a second, but if you can make one happen why _not_ the other? if you already have a very powerful video compressor with low latency, why not do hosted applications?
Totally makes sense because you unconstrain yourself from supporting all web-browsers, rolling out features gradually, and it unconstrains you from javascript too.
Imagine instead of google docs you had microsoft excel but surrounded by a browser window, everything else is the same. I know people would pay for that. (even if I personally prefer google docs)
