YouTube are clearly able (to) filter porn and pedophile material but appear to choose not to filter out the unauthorized music and film content which is core to their business success.
While I don't think YouTube clips are hurting Prince's pocket too bad, he does have a point. So to combat the illegal use of Prince's music and likeness, he hired a British company called Web Sheriff, which is handling the job of removing the illegal music, content and merchandise.
Web Sheriff's managing director noted that the company has removed approximately 2,000 clips, but added that there could be 100-500 Prince clips loaded per day.
Next, a formal response from YouTube chief counsel:
Most content owners understand that we respect copyrights, we work every day to help them manage their content, and we are developing state-of-the-art tools to let them do that even better.
They both make good points, they both wield a lot of power. Should be an interesting showdown at the very least. On the other hand, as this blog points out, instead of dropping a lawsuit, Trent Reznor just begs his fans to download a free illegal version, assuming they can't find a regular one anyway. Apparently it's hard to come by anything other than a pirated version of a NIN record in China:
As for the special situation in China, it does not seem to be easy to obtain Western music via legal channels, so I have the following suggestion for our fans: If you can find and buy our legal CDs, I express my thanks for your support. If you cannot find it, I think that downloading from the Internet is a more acceptable option than buying pirated CDs. Our music is easy to find on the Internet, and you might not need to spend much effort to find most of our songs. If you like our songs after you've heard them, please feel free to share it with your friends. As I have put all my effort and heart into my music, I sincerely hope that more and more people can share the enjoyment with us.



