I guess a vast majority of people simply don't want to pay if there is a somewhat acceptable free alternative.
The reason I do not pay for YouTube is that despite paying, I'm still the product - Google is still collecting every bit of data about me, to spam me on their other channels. Instead, I use YouTube (and every other Google product) logged-out, deleting cookies often[0]. I can't do that if I pay for YouTube.
[0] I used to reject cookies, but Google has become unusable that way -- everything goes back to defaults which are exceptionally bad for me.
For me, this is similar to why I won't pay for the New York Times subscription, either. I mainly only do stuff on both sites when I find a link to their site. I don't go to their site to do stuff on my own. Why would I subscribe to a site that I don't go to on my own? I do subscribe to ArsTechnica, for example, because I go there frequently.
Furthermore, I might not mind ads, but the ads on YouTube are very obnoxious. There's no intelligence, so you get weird situations like watching a 2 minute ad before being able to watch a 30 second video. Or ads cutting off the speaker mid word. Who thinks that's a good experience? If they can't get that stuff right, why would I pay them?
And on top of that, I find YouTube's "Hey did you know you can pay us money now?!?!?!" pop-ups all over the page to be obnoxious enough that I have decided I will never pay them any money.
Were I a regular visitor who wasn't so off-put by their ham-fisted advertising, I might have considered it, but now they've made going to their site so unpleasant I just avoid it if I can, or hold my nose for a few minutes when watching something with ads. Then I get away from their site as quickly as possible.