You're not missing anything. The really weird thing about Youtube Premium is that even if you do pay for it, you're better off not signing into your account and still using uBlock Origin and NewPipe.
I paid for Youtube Premium for a pretty long while, and the only reason to pay for it is because you want to support Youtube. The official app for Android was awful the last time I used it, I've never been tempted to go back to it from NewPipe. You'd download videos and sometimes Youtube would just decide, "no, that's not downloaded anymore." It was way more battery hungry than NewPipe. I had less control over mobile data. It was glitchier and I couldn't turn off distracting features like comments or recommendations.
There was also this weird problem where signing in on both desktop and mobile would occasionally mess with playback and Google would tell me that I needed to only have a video on one device at a time. NewPipe doesn't have that problem.
And there's the privacy angle: Youtube Premium necessarily requires you to be logged in and to have your videos tracked, that's part of how the funds get distributed to creators.
---
So for a while I just gave Youtube money and literally didn't use the service at all, because adblocking was better in every way. But I gave them money because I wanted to pay for the service. And eventually I realized I couldn't figure out what I was paying for. I wasn't paying for content, because I wasn't logged in, so the people I was watching weren't getting subscription revenue from me. I was giving Google money, but it wasn't clear to me that giving them money was proving anything or making Youtube better or encouraging them to do anything -- whenever I looked at Youtube Premium it seemed like the service was actively getting worse and that a lot of the annoyances I was supposedly paying to avoid were creeping back into the service.
And I eventually realized that Youtube does provide Google value even if I'm not paying for it. It allows them to effectively hold a near-monopoly on independent video hosting online. And so I stopped paying for it because the only reason to pay for it was for an idealistic reason, and I realized that I'm actually be fine with Youtube failing and more independent sites popping up, and I don't actually want to encourage Youtube and if anything I'm happy for it to be a loss-leader for Google. For the creators themselves, direct donations turn out to be a lot more valuable, and I try to do that now when I can.
But every once and a while it comes up as an example of "people won't pay for anything" and like... I just don't think that's true. The reality is you are paying for less than nothing when you use Youtube Premium. You are paying for a worse experience than you would get from an adblocker, and in some cases you're paying for even more annoyance when Google starts getting snippy about how you use your accounts between computers. Idealism is one thing, but is it actually surprising to anyone that people don't feel motivated to donate money to Google?
Because that's what Youtube Premium is. There is no reason to use it unless you want to donate money to Google. The price isn't even the main issue -- even if Youtube Premium was free, I wouldn't use it. It's a worse experience than 3rd-party clients and adblockers. It exists so that Google can try to tie it into existing services or make a case to the public that they need ads, but this is not a serious effort by a company that actually wants to offer a real service for money.