That seems odd to me - sure in the water rowing is slower (friction is way higher), but in terms of muscle use and energy output, rowing uses way more muscles and gets better range of motion in the legs.
I think it's that the cycling movement is just more efficient for sustained efforts, possibly because it uses less muscles. For sustained efforts, I don't think being able to use more muscles is an advantage, since you're going to be limited by your cardiovascular system. If you created a bike that you could also generate power with your arms, i woudln't expect to be able to put out more power because muscles are the limiter.
The muscle fiber distribution might be in favor of only using your legs as well (eg. fast vs slow twitch)
I'm not much of a rower, but after your pull, pulling your body forward for the next row is all wasted effort as far as producing mechanical work. Cycling doesn't really have any wasted phase like this.
What I'm not sure is if you were to measure total energy expenditure at the human (as opposed to the spinning wheel), then cycling/rowing might be closer.