What those drivers do is patented in the US. See MPEG licensing. VLC is based in the EU which does not have a mechanism for software patents that do not solve a physical problem (moving bits around isn’t patentable there) so they can avoid issues. Microsoft, Corel, and Nero would not be able to do that, they have assets in the US, even if it would only be a bank account.

I would not be surprised if codec licensing would not allow shipping with old and open codecs like MJPEG, Theora and AV1 with an addon for the proprietary codecs.

Seems like Phil saw them as a decent software company and a bad hardware company. Kinect, Zune, Kin, and Hololens don’t stack up to the PS Move, Walkman, Xperia, and PS VR. The Switch 2 is selling, so the execs can’t blame shrinking demand for hardware.