> It may be the case that there is no solution to being legally viable and being profitable, in which case, your business will cease to exist.
Or your business will exist illegally.
There's this interesting interplay between law and economics, where law is generally taken as a prerequisite for frictionless commerce, and yet at the same time if activities that large groups of people wish to partake in are made illegal, the market just routes around them and black markets spring up to provide them. Prohibition. The War on Drugs. Filesharing. Gambling. Employing illegal immigrants. Usury. Short-term rentals. Taxi medallions. Large swaths of the economy under communism.
There are a couple other interesting phenomena related to this: the very illegality of the activity tends to create large profits around it (because it creates barriers to entry, such that the market often ends up monopolized by a small cartel), and the existence of widespread black markets erodes respect for rule of law itself. When people see people around them getting very rich or otherwise deriving benefit from flouting the law, why should they follow it?
Switching to editorializing mode, I think that this gradual erosion of respect for law to be quite troubling, and I also think that the solution to it needs to be two-fold: stop trying to outlaw behaviors that are offensive to some but beloved by others, and start enforcing laws that if neglected really will result in the destruction of the system.
True.
In the context of this particular case, I was assuming that nothing the current size of YouTube could exist illegally, as that would imply that whatever authority was declaring them "illegal", but not capable of doing anything about it despite it nominally living in its jurisdiction, must be anemic and impotent to the point of being nearly non-existent.
There's already an underground proliferation of video sites, spreading copyrighted content out of the bounds of what the rightsholders want, so it's pretty much assured we'd end up with illegal alternatives. :)