There has been much speculation on the reasons for YouTube's spectacular growth, even while competing against services such as Google Video and MSN Video which started earlier or have deeper pockets. While I agree that YouTube has a nice clean user experience, facilitates sharing, and just plain works well (in contrast to, say, Comedy Central's own overloaded site), one of the key reasons they caught on is their fortuitous timing with respect to the posting of copyright material.
While the bulk of the material that is posted and viewed on the site is consumer-generated, what put YouTube on the map was posting the Lazy Sunday video from Saturday Night Live. During the interval before NBC demanded its removal, people passed the link around to their friends and the YouTube community took off. The entertainment industry, which up to this point had been quick to sue anyone who used its content without permission, took note of the promotional value of exposure on the internet. YouTube co-founder Chad Hurley told The Hollywood Reporter "There's been a few examples of marketing departments uploading content directly to the site, while on the other side of the company their attorney is demanding we remove this content."
A few years ago, YouTube might have been sued into oblivion. Mark Cuban still thinks it may happen. However, with the possibe exception of Universal Music Group, the entertainment companies have been content with sending YouTube DMCA Takedown Notices and simultaneously negotiating for a percentage of the ad revenues when they materialize. They have announced that they are developing technology that will track copyrighted material as it is uploaded and viewed, although the details have yet to be announced. One potential sticking point is how to compensate artists for incidental use of music in consumer-generated videos where there may be multiple, overlapping rights. Cuban thinks this problem will be the death of YouTube and even lead Hollywood to lobby for further legislation, but it may also be the beginning of the end of that model of intellectual property.