Different problem than the one that the coward who deleted his posts was talking about. Sadly, we lost context because he hit delete after realizing that he was wrong.
That said, YouTube survived those lawsuits and continues to exist because of laws that the music industry itself lobbied for... they just hadn't considered all of the ramifications terribly deeply.
There are lots of companies that don't have Google's deep pockets that survive because of the DMCA. So while it's true that YouTube was sued, and that Google defended it, it's absolutely NOT true that the only way for a content company to survive is to have Google's access to capital.
Yes, the act of initiating legal action is prosecution, whether the action is civil or criminal. We don't call the people doing that act "the prosecution" in a civil case, but the act itself is still prosecution.
Then are we going to pretend that the Music Industry didn't try to sue YouTube out of existence and possibly only survived thanks to Google's deep wallets?
If you need deep corporate wallets to protect yourself to create a service like YouTube its not hard to see how a system like ContentID might come about to protect yourself from lawyers. Mountains of "pirate" evidence or not, protecting yourself from Hollywood's lawyers is expensive.