I briefly touched on this in a lengthy comment when this scheme was originally floated a few months ago. Your prediction, which granted is something that Youtube/Google absolutely would try if they thought they could get away with it, would only work on viewers that remained within the confines of Youtube's native player.

Any third party app capable of bullying or tricking Youtube into handing them the video data is free to do whatever it wants to with it afterwards, even if this ultimately means impeccably pretending to be the official Youtube player in order to get the server to fork over the data. Furthermore, video playback is buffered so a hypothetical pirate client would have several seconds worth of upcoming video to analyze and determine what it wants to do with it.

Youtube could certainly make this process rather difficult by including some kind of end-to-end DRM or something, but at the end of the day you need to make a playable video stream arrive on the client's device or computer somehow, and if you can't guarantee full control of the entire environment in which that happens, dedicated nerds will find a away to screw with that data.