I don't find this very surprising. Google/Youtube simply wants to own the distribution channel. If your company is taking their distribution channel and wrapping your logo and ads on top of it and making revenue for you, then they aren't going to be happy about it.
Newspapers don't have (large) online distribution channels, but google does. Newspapers have content and google has the online distribution channel that gets millions more people to view that content.
That's true, but I tend to see it as, "google is re-packaging the content for a different audience". In my news example, Google News is targeting the people who don't have time to delve into their local newspapers and just want a quick overview of the news. In a a sense, that's what Totlol is doing- just re-packaging the news for a different audience. The fact that Totlol is 1000x smaller than Google makes what Google is doing more nefarious. Why rip off the little guy?
Additionally, just because google has a large online distribution channel doesn't give it the right to steal. There's something to be said about information proliferating to a mass audience, but in many cases, what Google News does is basically stealing!
To me the solution is so obvious - Google should allow Youtube API users to have some sort of custom adsense, that both google and Totlol can share, for example, that I don't understand why they don't implement it.
The very first prototype of Totlol had an upload button and no YouTube integration. When it was done I contacted a content creator with a good YouTube presence and showed it to them. The response: "Great idea for a site" but "we have limited resources when it comes to distributing ... so our participation isn't a sure thing." They never uploaded. I got replies along the same lines from others I contacted.
/FTA
Maybe there's a business plan in there somewhere. I.e., create a tool that distributes videos to various channels (YouTube, Totlol, Revver, Vimeo, etc.)
Using a API means you are working for whomever is on the other side. Ebay ran with the store concept and profited by it. YouTube should create a store "model" to license to share profits from use of any API. Large companies usually cut their own throat by thinking they can out maneuver smaller companies.
