Disclosure: I am a Googler, though not working on anything remotely near YouTube. Obvious caveat: this is just my personal opinion.
> With this backdrop, we temporarily took down our full-featured app when Google objected to it last May
If I remember right, this full-featured app included features like:
1. Allowing users to download videos even when the content provider disallowed that.
2. Allowing users to not view ads even when the content provider specifically required ads to be shown.
3. Using YouTube's branding without permission.
I am but a lowly engineer and the actions of executives confuse me, but I don't see how Microsoft didn't realize the above was batshit crazy. I can only assume this is some sort of weird ploy.
YouTube's entire business model is about getting content providers to put videos up there so that people will watch ads to see them. If you let people take videos off the site, or just skip the ads, that breaks the fundamental business proposition.
This would be like me making an Android app called "Bing from Micrsoft" that let you perform bing searches but then stripped out all of the ads. Microsoft would shut that shit down, with good reason.
> When we first built a YouTube app for Windows Phone, we did so with the understanding that Google claimed to grow its business based on open access to its platforms and content, a point it reiterated last year.
"Open access to content" doesn't mean "ignore the requirements of the people who created that content". People make their livelihoods producing YouTube videos and the only way that money flows to those creators is because of ads. If you make a Windows Phone app that lets you watch Cooking with Dog without the ads, you aren't doing Francis any favors by giving out "open access" to his content.
(Yes, I did just imply that they are the dog's videos. He is the host, after all.)