That's because the core product is not anywhere near worth what they charge for it. The youtube interface is a nightmare for users and creators alike. I have very little controls over what I do and don't see, how I can filter or search for content, or how I can search for new content. History of both videos and comments are effectively non existent and impossible to reasonably search or archive.
It's not a service so much as it is a copyright clearinghouse.
If they had an actual experience with worthwhile features to offer then they wouldn't have to artificially degrade the free experience to convince you.
Youtube music is fine-ish. Search is pretty weak and prefers recommendations over results. The controls for playlist Play, Play with Shuffle, and Play with Autoadd are fairly confusing especially between the app and the desktop version. Creating and managing multiple playlists is a frustrating experience and not thought out at all. It constantly feeling the need to change the album art on my playlists.
You pay to not be annoyed. You're not paying for a "premium" product in any way.
I believe they are rolling out audio ads.
Such a strange business model, making the free version below acceptable.