I believe his point was that the experience on YouTube let's plays is fundamentally different from gameplay to an extent that it constitutes a transformative work.  And that's without going into the use of commentary, comedy, critique, editing, etc. that further establish let's play videos in the vein of Joe's as fair use.

I'm sure that's what he meant, but his example couldn't have been more off.  It's a fair argument that the gameplay is owned by the player, but the artwork, music, and story is still owned by the creator.  The problem is the gameplay cannot exist without someone else's intellectual works - hence someone making profit off of someone elses work.  

You can't legally display or distribute those works for profit (especially not in their entirety) in an effort to show off your gameplay.   Fair use covers transformative, critiquing, etc, but there are usually still limits on the amount of the original work that you can use in such a manner.  

If I was to read an entire book on youtube it would definitely be a copyright infringement (especially if it's for profit).  It's transformative because the person watching the video is hearing it not reading it.  I could do voices and be entertaining - a performance that I would own the rights to.  The person receiving the story are no longer having the experience of reading or turning the pages etc (this is an important part of reading to many people).  That doesn't take away the fact that the story itself is copyrighted and I am still distributing it in it's entirety.  I could even take pauses to critique the story along the way, but it would still be illegal.

There are no perfect analogies because no media is quite like video games.  Copyright is full of gray area and the only true resolution would be a court case.  It's extremely unlikely that anyone playing a game in it's entirety (let's play) would win that court case.  A standard critique of a game is already well defined as legal and will never be a real copyright issue.

But the videos Nintendo is claiming are not just works with no commentary or works that show an entire game's core content.  Joe's video that started all this was heavily edited, didn't show nearly the whole of the game's core content, didn't even show a single full uninterrupted session of MP10, and had a heavy focus on the commentary, comedy, and interactions of Joe and the other players.  The only thing more fair use than that is critique, which is pretty much universally protected.  Also, audio book example is not a good comparison.  That still provides the same essential experience: the conveyance of a story through words in the same structure.  When the amount of th work used AND the means by which it is used constitutes a substitutional experience, it isn't fair use.  However, videos like the one Joe did and like the ones done by Total biscuit and other major YouTubers most certainly do not provide a substitutional experience; that's why they are popular.  Now if you do a full let's play, you will have more legal issues to surmount.  But it's really going to come down to 1) was there large amounts of your own work involved that constitutes its own addition to the experience, 2) was there heavy editing, 3) was the focus on the game itself or your specific discussion/critique/commentary.  If the answer to all of those is yes, you still have a pretty strong case.  But as I pointed out, the reason this particular instance has caused such a stir is because Nintendo is claiming gameplay vids that are much more clean cut.

Worth noting once again that this isn't so much a case of "Nintendo claiming gameplay vids", but Youtube's Content ID system taking down gameplay videos. There is a pretty big difference between the two, as Youtube's system is automated and highly flawed. This system has an extremely difficult time distinguishing between fair use and something that isn't fair use which does result in false claims. However, that is why there is a system to respond to these claims and get your videos back. That system is slow and not ideal, but it exists to provide a means of getting your videos back without involving court. However, the majority of this system is not in Nintendo's hands, and the fault is largely in Youtube's automated system.

It's fair use if it's to spread information in a non profitable and beneficial way. If you're monetizing your video and it's sponsered it is not covered by fair use and it breaking copyright laws. All publishers know this but they see the value in the YouTube community therefore leave them to do as they wish.

Nintendo do not as they wish to control and censor content that goes on YouTube. Again, dick move.

He's still profiting off of someone elses creative work.  Even if he is adding his own creative work on top of it.  In the same way that I would own the rights to my performance, I still don't have the right to distribute and profit from that work.  It doesn't have to be the work in it's entirety (even reading part of the book could easily be an infringement).   

It doesn't have be substitutional or a direct duplicate for it to violate the holder's rights.  That only applies to one of the laws conditions (a condition that could be difficult to defend on some let's play videos).  That actually is connected to a clause that could be difficult to defend in other regards.  Nintendo could certainly argue that it undermines their potential market for their own youtube channel.  Even the possibility that this has a financial effect on Nintendo would likely be enough in any fair use court case.

All conditions of fair use must be satisfied for it to be valid.   The conditions that would be the hardest for youtubers to overcome would likely be the amount of the game used coupled with the fact that it is for profit.  That is something that would be very difficult to overcome even if it is a heavily edited video.  

I didn't see the video and I have no doubt that if falls into copyright gray area (most things do).  It would still be a difficult defense for any youtuber to make if they are sharing someone's intellectual properties in a for profit manner.  Nintendo has every right to aggressively police its intellectual property across any and all media.  That's not to say that it is always a good idea.

Is it Nintendo's "right", sure. Is it a smart play, not even close. YouTubers undeniably bring attention to their games...more so than they themselves even do. I mean, look at the marketing for the wii u. Total disaster.

Their programs is just a censorship technique. This was not the solution. This is no different than buying off a review.

And people, get a grip. No one youtuber makes "millions". They probably make a livable wage. Nintendo would never see any of that profit anyways because it isn't their content. Its their product, sure. But I never watch a Lets Play and think "Well, now I don't have to buy the game". Games are interactive, very different than a movie.

Even still, Nintendo wouldn't make anything off that ad because it wasn't ever going to be on Nintendos channel!  It was on the youtubers channel!  So the only thing that happens is Nintendo stops getting free advertisment.  No one is going to go to Nintendos channel to watch angry joe because ANGRY JOE ISNT THERE.

Its really nothing like buying off a review...

For one, Nintendo is the one making money off of it, not the Youtubers. This means that there really isn't any bias introduced due to being paid.

There is also no implication of positive coverage. You could make a video speaking badly about Nintendo and featuring footage of their games within the program.

Third, this program is not for reviews as those fall under fair use.

Overall, you are really just revenue sharing for a liscence to use the game in a way that would otherwise violate copyright law (or at least fall into a grey area that nobody really knows how to handle).

True enough that people go to Angry Joe's channel to see Angry Joe.  But if he is using Nintendo's IP to draw in and profit off of viewers, Nintendo could make a valid claim that it has a negative impact on the potential viewership and profit of their own channel.  Showing any impact to their IP's value or the companies profit through direct sales, licensing, etc would be very damaging to any 'fair use' defense.  The defense would have the burden of proof that they didn't take away viewership of any current and potential MP videos on Nintendo's own channel.  

I don't think it would ever come to that because it would likely be unnecessary.  I'm just pointing out that 'fair use' doesn't only apply to them in the gaming industry but rather to all of their existing and potential markets.