Didn't YouTube get popular on pirated content first? What was the main difference of the initial phase of YouTube and MegaUpload? They both went legal later.
I think youtube cooperated with taking pirated content down while Kim was a bit like screw you, I'm offshore, you can't get me.
I don't think Kim ever paid content creators. Youtube is pushing probably $5 - $10 billion a year to them in cash plus serves as a promo / branding / ad vehicle (all the sponsored content or product placement stuff in music videos).