The fact that Google gives the violation of their agreement as the reason doesn't mean it IS the real reason behind it. There are many other youtube apps (like MetroTube) that do the same thing, but they don't get removed. It's a fact that Google has been boycotting Microsoft for years. They blocked GMail syncing for Windows Phone devices, they disabled Google Maps for WP (it worked before, but then they just blocked all WP devices), and now they do it again.
Sure, you can argue that "well Android has majority market share so it's in microsoft's advantage to have apps in that platform!" - and you would be correct.
However, that doesn't excuse having the web views for Windows Phone on gmail and maps (and maybe youtube?) be significantly worse than those for iOS/Android. Like, the work has already been done - Google just does not redirect WP users to the "pretty" sites. If you manually enter in the iOS/Android URL on WP, it works fine. It's just not defaulted. And that's lame.
Exactly how long do you think, say, Viacom woulds tolerate a high-profile, name-brand YouTube app that blocked ads and supported video downloads? And what do you think Viacom would do to Google if Google's response to that app was turning a blind eye?
Crossposting my own comment from another thread.
So, for years, Google's stated reason for lack of a Youtube client was that Windows Phone didn't have enough marketshare, and now suddenly it has so many users that it loses so many ad impressions because Microsoft's Youtube that the content creators are suffering because all the millions of freeloaders using Windows Phone?
i.e It doesn't care enough for the ad impressions on Windows Phone to itself make an app , but when MS does, the loss of the same revenue is the reason for sending the lawyers in and pulling the app?