Compilation videos predate modern video consumption methods and were designed to be compact, efficient and affordable products that allowed casual fans to relive the series.
Other answers cover the modern concept nicely, but as someone whose first experiences with anime dates back to the world of media that existed prior to streaming, Blu-rays and DVDs, the reasoning is simple: It was not practical or economical for studios to pump out VHS episode collections back in the 1970s and 1980s.
I first got into anime when trying to get episodes of old English versions of anime I grew up with: Battle of the Planets (aka: Science Ninja Team Gatchaman) and Star Blazers (aka: Space Battleship Yamato) as well as old Space Pirate Captain Harlock episodes I would occasionally see on local UHF stations in NYC back in the day.
Needless to say in the late 1980s and early 1990s, there weren’t many quality or comprehensive releases of vintage anime like that on VHS past a few official compilation “direct-to-video” releases.
So while nowadays, I can easily purchase DVD or Blu-ray set of all of the episodes of any of those series, back then relatively short official compilation VHS releases is the best anyone could do.
Thus, things like the Gatchaman The Movie (1978) were compiled and released in theaters and eventually on home video. Whether compilation “films” like this were good or bad, for most people at the time a “movie” like this was the only way to rewatch the characters of Gatchaman at home on their own VHS players.
And sure, fandom-based tape dubbing circles existed. But for the average fan who just wants a bit of nostalgia, compilation “films” like this worked well.
I don’t believe there was ever a Space Battleship Yamato video compilation film that was ever released in this way, but the first few Space Battleship Yamato movies were basically a retelling of the exact same story told in the multi-episode TV series.
Ditto with Space Pirate Captain Harlock but I cannot recall the exact name of the VHS release but among fan circles that VHS compilation of a handful of TV episodes was considered a compilation made for “kids” since it summarized and simplified a lot of the plot-lines to make it all more self-contained.