The truth is difficult to find if those that know it have a lot to lose when it's revealed. Three years after Viacom sued YouTube for 1 billion dollars, some pieces of truth are revealed:
"For years, Viacom continuously and secretly uploaded its content to YouTube, even while publicly complaining about its presence there. It hired no fewer than 18 different marketing agencies to upload its content to the site. It deliberately "roughed up" the videos to make them look stolen or leaked. It opened YouTube accounts using phony email addresses. It even sent employees to Kinko's to upload clips from computers that couldn't be traced to Viacom. And in an effort to promote its own shows, as a matter of company policy Viacom routinely left up clips from shows that had been uploaded to YouTube by ordinary users." (YouTube blog)
"Viacom produced numerous documents, including a Google memorandum from the Google Video team about YouTube. The team told senior Google execs that YouTube was a "rogue enabler" of content theft, that its content is all free, and much of it is highly sought after pirated clips and that YouTube's business model is completely sustained by pirated content. In May 2006, Ethan Anderson, international business product manager for Google Video, told other execs, I can't believe you're recommending buying YouTube... they're 80 percent illegal pirated content." (Ars Technica)
While YouTube became popular by hosting unauthorized content, it's now a platform for self-expression and many companies use tools like Content ID to make money from the videos that include their content. Like many other online services, YouTube is protected by the DMCA, a United States copyright law which "creates a safe harbor for online service providers against copyright liability if they adhere to and qualify for certain prescribed safe harbor guidelines and promptly block access to allegedly infringing material (or remove such material from their systems) if they receive a notification claiming infringement from a copyright holder or the copyright holder's agent."
Even if YouTube's employees were aware that a lot of the videos weren't uploaded by the copyright owners, it was difficult to tell which videos should be removed.
This case shows that it's a bad idea to fight against those that love your work and want to promote it. Encouraging fans to be creative, learning from their ideas, finding which of your works is more popular and making money from ads - there's a lot to gain from being open-minded.