Can't charge a markup on Free.

Probably, if they wanted to. The historical writing is on the wall that they don't want to, though, as part of whatever their business strategy is. Fear of legal complications due to overtly being a for-profit commercial enterprise might also have something to do with it.

Microsoft is already quite infamous for e.g. going so far as to license third party .zip decompressing code to build into Windows Explorer rather than develop their own, code which apparently nobody in Redmond could be bothered to understand and thus to this very day the .zip archive handling capabilities of Explorer remain frozen and time from the XP era and so rinky-dink that they pale in comparison to commandline tools from the '90s. That's let alone compared to something like 7-Zip.

This also raises the issue of having to maintain said code over subsequent releases and continually update it to support evolving standards, etc., which not only isn't free but presents no obvious mechanism for extracting any revenue from anybody to offset that cost. The current plan of simply outsourcing the entire problem to its rightsholders and passing the licensing cost directly to the consumer allows Microsoft to handily wash their hands of the entire affair, enabling them to devote more resources to trying to shoehorn Copilot AI into the character map or the registry editor, or whatever the fuck.

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.