The situation in itself is not unusual, performers often give YouTubers permission to use their songs in videos. But what happened was unusual and disapointing for MGM. Joe stated that he received a copy right infringement notification directly from the record label (Ultra Records) asking him to remove the video, which he did. I understand that once an artist signs a record contract they technically no longer control the rights to their music, but this seems a bit silly to me. I'm not saying it was his best video ever, but it was good and it was promoting one of their artists with clear links to find out more about her.
Call me old fashioned but there's a phrase that goes "all press is good press." So when a talented well known artist puts together a well thought out and well executed video FOR FREE, why would you want to put the kibosh on that? It will promote your artist, resulting in better awareness/popularity and more importantly SALES (aka money to keep your company running.)
I think what the record label is really pushing is that you have to go to their page to discover their artist, which doesn't work. For better or worse, the idea that as a label you can completely control the discovery of your content is not a reality any longer. While it might be ideal as a company for customers to come to your record label's YouTube page to find out about new artists, that's really not how it works anymore. As humans we make many of our decisions by recommendation or word of mouth. So if someone with a large audience is willing to promote your artist why not let them?
As Her record label if Vassy were to go on SNL and sing her songs you would be ok with that? You'd probably even let her go on a lesser known show to promote her music. So when a guy who consistently gets over a million views on his videos and has over 82 million total video views you'd be crazy not to roll with it, right?
Just check out these analytics on her video for an acoustic version of her song "history" after Joe took the video down and simply linked to it in a video on his SECOND channel, which has much fewer subscribers. You might see a recent spike.

The original video in question (I did not repost it, just found it):
Joe's Explanation:
Vassy:
