I do believe youtube has overdone it, but there is a lot of misinformation in this thread.

To distribute a derivative work, i.e. a cover, a mechanical license must be obtained from the owner of the copyrighted song (the publisher). This money is often split between songwriter and publisher. A record label should have no claim to this as they own master recordings, not compositions.

To have copyrighted song attached to video, like a soundtrack, a sync license must be obtained from the publisher. This is often harder to get than the mechanical license. Also, master recordings must be licensed from labels.

Fair use is really a subjective thing, and a judge is tasked with deciding if fair use applies based on 4 factors: purpose of use, nature of work, substantiality of used portion, and effect on market. So, it's complicated, and usage in YouTube videos is never cut and dry.