It could monetize really well, actually. I'm sure that jtv has already thought of this, but they can be the hulu of live broadcasts. I've seem ad overlays as well on Justin.tv for what it's worth.
(Also, copyright violation is not the same thing as "illegal". It is a civil violation.)
With 90% of traffic being foreign, the odds of being able to successfully monetize is slim.
And copyright violation is illegal and you can go to prison for it (though JTV has a good excuse in that it's user generated). Making it the cornerstone of your business is risky. People go to prison for copyright violations fairly frequently, the owners of EliteTorrents are a recent example:
Illegal usually applies to criminal law, not civil law. I do know that there are some criminal copyright violations.
My point would be just that it's not proper to say that copyright violations are illegal because most copyright violations are in the realm of property law, not criminal law.
(Also, copyright violation is not the same thing as "illegal". It is a civil violation.)