There's some sense in this, but it's all too easy to think small and end up small. You need to concentrate on making it work well for 1 demographic, as he says, but keep an eye out that you aren't excluding others or making meaningless decisions that hurt your product on the global scale.

If you concentrate on "indie bands and their music videos", sure, you'll hit the sweet spot for them. But you might have decided that limiting uploads to 8 minutes made sense because no music video will be longer than that. It makes sense from other standpoints, too, because it's easier to store, stream, and otherwise handle smaller videos.

But what about indie movie producers? Or kids with cats? Or ... Well, the billions of other video producers out there.

A friend of mine was recently upset that YouTube was limiting him to 15 minutes. He wanted to upload gameplay recordings, and splitting them into 15 minute chunks was a real pain.

Notch's Ludum Dare coding videos would also not have been allowed, and they were excellent watching. I had never heard of the video host, and might never hear of them again... Assuming I don't use them. And I might.

So don't blindfold yourself and work on niches. Work on the big picture, but be sure to make sure your product actually does work for some specific tasks.