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MySQL and Linux weren't as good or better than the closed alternatives when they gained tractionI don't recall either gaining any traction until they were better in some way, either for developers or implementors. In some cases just being "open" makes it better, but that's only true if the project is going to be adopted in some way, like Apple using KHTML for WebKit.
In the case of Theora, nobody wants to adopt it as a long term project, they just want to implement video for their users. From that perspective, H.264 is better (I'm a layman here, but as I understand it the quality is better and the file sizes are significantly smaller, but correct me if I'm wrong).
It would certainly be better if they all got together on Theora much like they have on WebKit, but it seems ongoing development can't have the same level of improvement on a video codec that it can on a rendering engine, at least that's my perspective on it.