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While you make some good points I would argue a few of them are off base.
First that "Unauthorized copyrighted videos make up only a small percentage of the videos on YouTube, and account for negligible traffic or revenue." That may be true now. Hell, I have better things to do than to surf Youtube all day and decide what is authorized and what isn't and what makes them money and what doesn't. That doesn't change the fact that when it started out there was a ton of unauthorized stuff on. Hell, The Daily Show was one of the people that went after them because you could watch entire episodes of The Daily Show on Youtube before they even aired on the west coast. There were a lot of companies that were very unhappy and complained and while much of their content has been taken down and the site has been cleaned up, it shouldn't make them immune from their past. I think them having a ton of TV shows, clips and other unauthorized stuff on the site is what helped make them who they are today. I think Viacom is trying to send the message that it isn't okay to use other people's content to grow your site and make a ton of money off of it even if you do clean it up later.
Sure part of the appeal of Youtube is that you can watch a trailer for a new movie, then watch some guy hurt himself while skateboarding and then see some chick dancing in her underwear and then watch a music video all within a few clicks of each other. It is TV for the ADD generation. As you said there are plenty of other sites that were not as big as Youtube that offer full shows on them, Youtube did it a little differently in that they just didn't upload the stuff themselves, they let the users control the content of the site so it became mob rule and the mob decided what they wanted to see and share no matter who owned or authorized the use of the content. That is one of the reasons it grew so fast. They have gotten better, but I think, if nothing, this suit might send a message to the clone sites that if you are going to run a site like this you better be prepared to defend yourself and maybe it will encourage others to not share unauthorized content.
I do agree with you that Google will eventually prevail in the case. They have a gray area law on their side and most people don't really understand the harm in sharing content.
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