It's all about the licensing
 

It may come down to what Hollywood is willing to pay.
What licensing structure is there for h.264 content and players?
-Les

2 cents per title if delivered on physical media and is greater than 12 minutes in length.

20 cents per encoder/decoder unit sold over 100,000, that has some sort of creeping price cap which is laid out until 2010 (what happens after 2010?)

http://www.mpegla.com/news/n_03-11-17_avc.html

That's 2 cents more for distribution than Windows Media, but 5 cents less per encoder/decoder

http://www.microsoft.com/windows/win...licensing.aspx

Apparently the licensing scheme that Microsoft has for MPEG4 on the above web site is not AVC MPEG4