I doubt storage of extremely unpopular videos is a significant cost for YT. Their revenue is ~25 billion per year. Assuming with redundancy they are paying say ~1,000$ per 8TB added per year. People are uploading 500+ Hours of video every minute. Assuming that’s mostly 30fps 4K video we are talking 50 Mbps * 60 * 500 * 1 year ~= 0.75 Billion per year or ~3.3% of revenues. (50 Mbps seems like an overly generous average.)

Not free, but cutting off say 10% of uploads to save ~0.3% is not going to help their bottom line much as they would lose out on some viral videos and future stars in the process. Plus, there are minimum view requirements before revenue sharing. Worse they could easily lose their spot as the default location for video uploads long term.