He has a contract with the musician whose songs he incorporated in the video. Would be simpler (and possibly more profitable) to use the dispute-resolution process and maybe indemnity built into that contract, tell the musician to call off the dogs and reimburse him for diverted profits and his time/expenses.
This doesn't sound like an example of YouTube badness, but rather an example of the hazards of working with unreliable business partners. And pay attention to your contracts!
It's quite possible that the musician doesn't actually own the rights and was never allowed to license the music in the first place. They may have negotiated some deal (handshake or formal), but musicians normally don't own the publishing rights to their own music; the label does.
>That does not - of course - give WC the right to steal 25% of the value of MJ's work just because YT says they can.
This is completely wrong. Youtube can do whatever it wants unless MumboJumbo specifically signed a contract with Youtube to receive guaranteed compensation. The only law Youtube has to follow is the copyright law and it's doing it to the fullest extent possible in this instance.
This doesn't sound like an example of YouTube badness, but rather an example of the hazards of working with unreliable business partners. And pay attention to your contracts!