If you run a normal hotel, and prostitutes dressed discreetly book overnight stays to take their clients for a visit, nobody’s going to blame the hotel as aiding a prostitution ring. However if you run a ‘hotel’ that charges an hourly rate, and the same women are constantly seen bringing men in all day long for one hour at a time, then a reasonable person would call the ‘hotel’ owner morally responsible for taking part in a prostitution ring, and profiting from that.
Google at this point is morally responsible for taking part in a copyright infringement ring, and profiting from that.
The Digital Millennium Copyright Act was a huge blow for the recording and movie industries, at the expense of Internet companies. Internet companies had a huge burden placed on them to be copyright cops. However Youtube has become so huge that copyright holders are having a hard time keeping up with sending takedown notices to Google, under the terms of the DMCA.
Google knows this. Everyone knows this. Youtube is full of copyright infringement, right now, that Google is running ads on, and making money from. Regardless of whether they’re legally in the right, morally they are profiting from a great deal of lawbreaking and copyright infringement. They are profiting from other people’s works, in a way that they have no right to do.
The law lets them effectively receive stolen property and make money from it, because they comply with the letter of the law, and receive safe harbor for that. That Safe Harbor is good. Without it the Internet as we know it would be crippled. But Google is big, and wealthy. They could do plenty. They choose not to.