The clearest info about this I’ve ever read is an article on LegalZoom website. I can’t post a link here, but if you google “cover song YouTube legalzoom” you will find it.
The most important part:
“Once a musical work has been published, anyone can record a cover version of the song by obtaining a mechanical license. A song is “published” when copies or recordings are distributed to the public for sale or rent. A live performance is not publication.
The song’s copyright owner must give you a mechanical license if you pay a royalty fee based on estimated revenue from your cover song. You can obtain a mechanical license through the Harry Fox Agency.
The mechanical license only covers the audio portion of your YouTube cover. To post video along with the song, you’ll need a synchronization license, also called a “sync” license. You must negotiate a sync license with the copyright holder. While copyright owners must grant mechanical licenses, they are not required to give you a sync license, nor is there a set fee for the license.
The good news is that many music publishers have already made agreements with YouTube that allow their songs to be used in exchange for a portion of the ad revenue generated on YouTube. You can find out if there is already an agreement in place for the song you want to use by contacting the music publisher directly.
Consequences of Posting a Cover Song Without a License
The consequences of posting a cover song without a music license depend on the copyright holder.
Some copyright owners don’t mind YouTube covers—they increase a song’s exposure and may introduce a new audience to the songwriters’ or original performer’s music. If songs are posted by fans, a band isn’t likely to risk alienating them by taking down their videos.
Other copyright owners object to unlicensed use of their work. A few years ago, Prince famously had YouTube remove a video that showed a toddler dancing to one of his songs.
If a copyright owner objects, YouTube may remove your video or it may negotiate a deal for the copyright owner to obtain revenue from ads that appear on YouTube. If YouTube removes the video for copyright issues, it will also place a strike against your YouTube channel. After multiple strikes, YouTube will delete your channel, along with the videos, subscribers, likes, views and comments. If you’ve worked hard to cultivate your channel, this can be devastating.”
Hope this helps!