iTunes, Google Music, Soundcloud, Spotify, etc. are all competitors in this situation. YouTube is a LOT less than 99.9% of the music distribution market.
"The average iTunes user spends ~$40 per year on the service"
That matches my experience, and that's average. Presumably the in-app purchase whales are skewing that high; it's probably closer to $20.
Between apps and video, that doesn't leave much for music. Almost all the money goes to Top 40 for that.
There's a lot of variety out there, but you're right, YouTube is the backstop.
On the house party subject, my roommates and I in college through roughly weekly parties, ranging from a few people to several hundred people, and we defaulted to Spotify (but used lots of other things as well). We could have definitely been an outlier, though, as I agree lots of people default to YouTube there.
Very occasionally he'll listen to the music I have on my home server.
Never any of the other free services.
So, I'd agree with the GP, but the demo is much younger than 15-30.
YouTube is such a popular resource for music that someone has taken to making a Chrome extension based around playing music from YouTube. https://streamus.com/
The creator mentioned when talking about the motivation behind this project that they've had issues with the gaps in the subscription based services (Spotify, Google Music, etc), whereas they've had good luck with finding music on YouTube.
If I were a musician in this situation I'd definitely not want to pull my music from YouTube.