Afraid people would move away to WebM is my guess. Wonder how this would affect HTML5. IIRC the choice of a video codec was the only thing missing from the spec, with Mozilla, Opera, Apple and Google pushing different technologies (Ogg Theora and H.264). If they can make the browser-side royalty-free, it would help a lot with getting it into HTML5.
The article only mentions the video side, not the playback of the video. I know Mozilla and Opera refused to pay royatlies on browsers to implement H.264.
In countries where patents on software algorithms are upheld, vendors and commercial users of products that use H.264/AVC are expected to pay patent licensing royalties for the patented technology that their products use. This applies to the Baseline Profile as well. A private organization known as MPEG LA, which is not affiliated in any way with the MPEG standardization organization, administers the licenses for patents applying to this standard, as well as the patent pools for MPEG-2 Part 1 Systems, MPEG-2 Part 2 Video, MPEG-4 Part 2 Video, and other technologies. The last US MPEG LA patents for H.264 may not expire until 2028.
On August 26, 2010 MPEG LA announced that H.264 encoded internet video that is free to end users will never be charged for royalties. All other royalties will remain in place such as the royalties for products that decode and encode H.264 video. The license terms are updated in 5-year blocks.
So it seems you STILL need to pay royalties to implement the codec, so Mozilla and Opera can't do it and produce a free browser. Apple and Microsoft is for H.264, Mozilla, Opera and Google are against it. Microsoft is willing to allow WebM in their software (though not by default), Mozilla, Opera and Google are supporting it, Apple is against it.
MPEG LA is triple-dipping. If you encode H.264, you pay a royalty fee for the encoder (usually a once-off fee). If you play back H.264 you pay a royalty fee (again, once off). This gives them a revenue stream from the hardware vendors that implements Blu-Ray, as well as the codec developers. But, if you produce H.264 content you ALSO need to pay. I suspect they want to get a royalty fee on every Blu-Ray disc sold, as well as every paid media stream on the Internet (Hulu, etc). They have dropped royalties on a part of the third set, which I doubt anyone paid them for anyway. This gives them some free advertising, and a chance to rail against any possible competitor (see WebM).
They want to encourage sites like YouTube to keep on using H.264 for video, to increase the take-up of the codec. However, since they don't free the decoder up, the browser makers STILL can't implement it, so I doubt their strategy would work all that well. H.264 is currently widely implemented in hardware devices (phones, GPU's, etc), which helps it a lot. However, if the demand is large enough there shouldn't be a reason a competing codec can't also be implemented in device hardware.
[EDIT]I was mistaken above. The codec license is per year. Mozilla calculated it at $5m/year, so it's not once-off per download like I thought. I think hardware makers pay the yearly fee plus a fee per device (something like $0.20 or $0.50).[/EDIT]