I think you're confusing MPEG and MPEG-LA, but either way you're mistaken.
MPEG claimed they were going to create royalty-free profiles of H.264 and then went back on that (possibly due to cunning political moves by Microsoft) and now claim to be evaluating a couple of ways forward for royalty-free codecs (a profile of H.264 again, or building on older MPEG 2 tech). It's fairly obvious that it was pressure from (primarily) Google & Mozilla that put RF codecs back on the table for them.
MPEG-LA reduced the uncertainty around their future codec licence payments, and as a result their maximum profits. Again almost certainly due to Google and Mozilla.
They didn't take their ball and go home, they negotiated and competed and as a result won valuable concessions that continue to have value as the next round of codec development begins.