The Problem is not Vimeo, the Problem is that YouTube has established the expectation that Video hosting on the web should be free. No other Video CDN can compete with that outside of a specific niche. Google owns Video.
Free? There are plenty of video hosting websites that will _pay me_ for putting a popular content on them. Pirate streaming sites are full of links to those, thats how they make money.
I think with strong net neutrality rules this space might be more competitive.