Why would they be "wasting money" on content. Without content all they have is a player. Regardless of whether that content is user submitted or produced in-house, the draw is the content not how it is delivered. People don't send me links saying, "hey, check out this awesome web service". They do send me links saying, "Hey, check out this hilarious video."
Ordinary people are not concerned with the technology used behind the scenes, all they care about is where can I see the Numa Numa guy or where can I go to stream "The Social Network". The ultimate winner in internet-delivered video will be the option with the best content at a reasonable price (and ad-sponsored free is reasonable as long as the ads aren't too obtrusive - I'm looking at you Hulu).
Does TechDirt maintain web server connection logs? The ones that record the IP address of all connections? Something that could be subject to subpoena? You might want to be careful of mentioning illegal activity in a public forum, especially one so well known to IP protectionist.
Google heavily invests in web2.0 content, think about Google Maps, it's information content. They employee thousands of drivers to generate content for their streetviews.
This would be on a grander scale, but it has the potential to be hugely more profitable. Imagine a YouTube produced feature-length movie franchise, available on almost every device for free. How many page views would something like that create? Can you imagine the ad impression income?
Instead of complaining that copyright is stifling competion, the tech industry should act. It's time the tech industry started heavily investing in original content. Google, via it's YouTube property, should start it's own movie production company. They have the resources, and high quality original content would give YouTube a competitive advantage over its rivals.
Instead of fighting the system, become part of the system and change it from within.