The court in question is the one of the state of Hamburg. The next step is one of the parties takes the case to the next (federal) level, both parties accept the ruling or they settle the case out of court.
At the core of the case is that GEMA (the institution representing the IP rights of content creators (in this case music) and Google have been unable to come to an agreement about royalties (GEMA wants more than Google is willing to pay).
Of note is that there is no dispute that Google/YouTube has to pay royalties in order to compensate artists - and Google did so until (if memory serves me right) 2009.
My take is: If YouTube/Google cannot provide the service because royalty fees would be higher than revenues from advertisement, than Google does not have a viable business model and should just close the service.
I hope this is only the beginning and other content creators find a way to charge Google for using their content.
E.G. I would like to be able to charge Google a small fee every time a Google Search Engine user clicks on a link to my website. Right now, Google uses MY content to attract visitors to Google (and running advertisement against it) without compensating me.
Alternative, Google could pay me for the privileg of indexing MY content with their robots.
And, before somebody throws the robots.txt argument at me, please note that my website goes behind a paywall next month, effectively forbidding Google to access MY content.