But I think it is going to be cheaper for them to spend a 100 million or so and buy out a top-end video codec developer and release the codec as open source.... or did they ?
"And remember, I am still allowed to do anything I want with the code. I just have to give MPEG-LA half a can of beer do it." Then free software would'nt be ablo to be free software. You cannot preserve freedom this way.
This is the problem right here; you used a term without bothering to mention that you're using a very specific definition of that term. In your view "freedom" does not mean maximizing my rights to do things with the software; instead, it involves deliberately limiting my rights in order to force me to pass along (your definition of) "freedom" to others.
There are definitions of freedom, many surprisingly common, which do not include that little quirk, and you'll find that "give up some of your freedom for someone else's sake" is, to many people, like saying "pay higher taxes so someone else can benefit".
The license shall not restrict any party from selling or giving away the software as a component of an aggregate software distribution containing programs from several different sources. The license shall not require a royalty or other fee for such sale."
I value the runtime on my battery operated devices enough to pay $0.20 for an efficiently decoded format.
(Maybe that is more than $0.20. Depending on volume the H.264 is $0.00, $0.20, or $0.10, but I think there is a base license also required that I can't find. In any event, adding H.264 to a computer probably costs less than half a can of beer.)
http://www.mpegla.com/main/programs/AVC/Documents/AVC_TermsS...
And remember, I am still allowed to do anything I want with the code. I just have to give MPEG-LA half a can of beer do it.