Your point is well taken, but it is not clear whether he can be treated as a service provider and take DMCA safe harbor. He could be treated as a partner, an employee or independent contractor in the business, base on how the business arrangement is.
At a minimum, for him being a service provider he has to deal with his friend at arm's length, such as signing user agreement and terms of service. From what he said it is unlikely they are making that arrangement.
