YouTube is a profit center for Google, VP8 is a delivery mechanism for YouTube. Google has already taken over the online video market with their purchase of YouTube, I doubt that sacrificing YouTube for a bigger share of the codec pie is really worth it to Google.
Instead they can play the long game. VP8 support can make its way into browsers and hardware, and by funding alternative codecs (increasing supply) they can keep the licensing costs for H.264 and its successors down. It's easy to speculate that if H.264 were the only game in town it would probably be more expensive.
I don't know what you mean by "battle of attrition". Current state of affairs is that we have some good, free codecs; some better, inexpensive codecs; and improvements are on the horizon in licensing, software support, hardware acceleration, and codec sophistication.
> they can keep the licensing costs for H.264 and its successors down. It's easy to speculate that if H.264 were the only game in town it would probably be more expensive
That isn't even a very speculative speculation. The release of Vorbis triggered clear drops in the MP3 licensing costs— at a time when there seemed to be no other reason to drop the prices.
Strategically, one major methods of success for royalty free codecs is simply to keep driving the— otherwise monopoly-class— profits out of the non-free codec space. They don't have to be the #1 choice to achieve this, just enough of a threat with enough installed base that the marginal cost of switching is kept low enough to present a real ceiling on the price of the non-free stuff. (Though the wider the adoption and the more competitive the harder and lower the price ceiling it creates)
Especially once you factor in all the disadvantages royalty bearing codecs have: Overheads from profit motivated engineering decisions, the need to constantly cannibalize the last generations revenue stream to keep the installed base on the 20-year patent expiration hamster wheel, the non-trivial base of users that just want something that works and is easy to integrate who don't like having to apply and pay for licenses and track and report usage quantities, etc… it's pretty clear that the RF side will eventually win this fight so long as they keep cracking away at it.
The only real question is how long and how many billions extra will the public pay before we get to that eventual outcome.
Instead they can play the long game. VP8 support can make its way into browsers and hardware, and by funding alternative codecs (increasing supply) they can keep the licensing costs for H.264 and its successors down. It's easy to speculate that if H.264 were the only game in town it would probably be more expensive.
I don't know what you mean by "battle of attrition". Current state of affairs is that we have some good, free codecs; some better, inexpensive codecs; and improvements are on the horizon in licensing, software support, hardware acceleration, and codec sophistication.