The content hosted on Youtube cannot be 100% hosted legally. It is impossible to believe that you can find a full album of Pink Floyd hosted on Youtube and that’s a legal thing.
This is an extract from the support page of Google:
Videos removed or blocked due to YouTube’s contractual obligations
YouTube enters into agreements with certain music copyright owners to allow use of their sound recordings and musical compositions.
What is the bottom line here? Is Youtube big enough to be allowed to publish full albums of Pink Floyd? Or does Youtube pay a dime to Universal so they are allowed to publish the audio content?
My question is: If Youtube can go away Scot’s free with this, why can’t the fediverse? If we start to host massive video/audio content, what will happen to the fediverse?
That’s pretty much it. If instances want to legally broadcast copyrighted content, they need to go through the licensing system. Generally involves giving them money, and to afford it, chances are good they’ll need to put up ads.