Reasearch has shown that it is because the audience is too supportive (from washingtonpost.com):
One series of psychological experiments offers insight into why the stars regularly underperform at the Academy Awards -- and what can be done about it. Contrary to the widely held belief that a supportive audience improves the performance of people under pressure, these experiments show exactly the opposite is true. All those fans, friends and family in the auditorium may make the stars feel good about what they are doing on stage, but it is probably making the show more boring for the rest of us.
via Tyler Cowen