Heh, from my original post in 2015:
me said:
The videos are 4:3 960x720, which is a little bit disappointing actually. We had heard comments that they were based on JPG, which obviously they aren't (which makes sense given the limited storage used). I guess the Live Photos are JPG, but the actual videos are not. I still don't know the actual video format, but assuming they're just H.264 I would have hoped for say 4:3 1440x1080. Actually, I'd prefer H.265 1440x1080, but that would cause problems with older iOS 9 compatible devices.
So finally Apple did come through... after two more new OS releases two years later.

Well, actually the 1440x1080 came last year IIRC, but with h.264.
I guess they needed 2 other main things for HEVC in Live Photos, besides OS support:
1) iPhone 7 series phones, to be able to encode in real-time HD h.265 HEVC. I had originally presumed that both the A8 and A9 iDevices would have this, but they don't. However, I wonder if they actually do but just that it's not activated. We know that older iDevices have h.265 support for FaceTime, so the hardware is likely there, but they chose not to activate it at this time on all those legacy devices, either because of licencing costs or because of marketing choices (or both). Regarding marketing choices, it's now a product differentiator for the iPhone 7 series and the upcoming 7s / 8 series, vs. the older models.
2) Skylake Macs, to be able to play back these 8-bit HEVC files in hardware. (See my previous post.)
Neither the iPhone 7 / 7 Plus or the Skylake MacBook Pros came out until the second half of 2016 long after the iOS 10 betas were out, so the timing just wasn't right. Now that they're already out, everything is falling into place. Actually, the Skylake iMacs were already out in 2015 and the Skylake MacBooks were out in April 2016, but that wasn't good enough because the higher dollar MacBook Pros and iMacs didn't have Skylake yet.
A nice bonus is that they have since released Kaby Lake Macs as well, and not only do they support the 8-bit HEVC hardware playback in High Sierra, they also add 10-bit HEVC hardware playback, as well as hardware 8-bit HEVC encoding. I now have both a Kaby Lake MacBook and a Kaby Lake iMac in my possession, and I am anxiously awaiting the public beta of High Sierra.
This also makes me wonder if the iPhone 8s will add 10-bit hardware encoding for HEVC, both for 4K video and for Live Photos, or at least for 4K video. This would be supported in iOS 12, and the hardware decoding would only be available to Kaby Lake Macs and later (Coffee Lake and Cannonlake).