Video distributors wanting to support both Flash and HTML5 users will have to encode twice; once in H.264, for Flash users, and again in WebM, for HTML5 users. This doubles the computational cost, doubles the storage requirements, and as an added bonus will tend to hurt quality. This is inconvenient for a small site with one or two videos; for sites like SmugMug it's an enormous headache. They can either suffer the doubled costs and complexity, or ignore HTML5 altogether and stick with Flash (emphasis mine)
This is what the outcome will be - arguments for removing support for H.264 fall flat since Google knows this is what will eventually happen (especially now that Chrome has become much more popular). The end result will be that fewer web sites will be iOS-compatible thereby strengthening Android, since it does support Flash. This is Google playing corporate BS games using "openness" as a guise, plain and simple... Guess they took some lessons from Apple.