Not sure, one could say they use their dominant search position and revenue to serve video at a loss and distort the market, making it very hard for anyone without an existing money printing machine to bootstrap a profitable video site. See vimeo.
that was my assumption when i read they weren't profitable
and also that streaming and storing video at that scale is almost a natural monopoly, with how much it must cost and how hard it would be to compete without existing resources
I'm sure that's what Google's accountants would love us (and the IRS) to continue to believe.