YOUTUBE has suffered a body blow with Warner Music deciding to pull “hundreds of thousands” of videos after talks over payment collapsed late on Friday.

The music giant has told YouTube to remove all Warner content, including music, where it owns the publishing rights.

Videos by artists including James Blunt, Led Zeppelin, Metallica, Madonna, Missy Elliott and TI will be removed. Warner will also force YouTube to pull any video content from films, TV or clips submitted by YouTube users that features music by Warner artists or songs owned by Warner Chappell, Warner’s music-publishing arm.

Warner Chappell is one of the world’s largest music publishers and owns classics including Happy Birthday to You and Winter Wonderland as well as the rights to Cole Porter and George and Ira Gershwin and music by Dido, Dr Dre, Eric Clapton, Red Hot Chili Peppers and Sheryl Crow.

Warner withdrew from talks after months of negotiations. The collapse comes at a sensitive moment for YouTube, which is engaged in negotiations with all the other big music companies.

Warner was the first leading music firm to reach a deal with YouTube. In September 2006 Warner agreed to share its library of music videos as well as behind-the-scenes footage, artist interviews, original programming and other content. The terms of the revenue-sharing agreement were not disclosed.

The other main labels followed. In October 2006, Google bought YouTube for $1.65 billion. Chad Hurley, YouTube’s chief executive, described the move at the time as “one of the most significant milestones for our company and our community”, underscoring “the vast financial potential” of YouTube to traditional media partners.

Yesterday a Warner spokesman said: “We are working actively to find a resolution with YouTube that would enable the return of our artists’ content to the site. Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

According to ComScore, an internet analyst, YouTube now accounts for a quarter of all Google search queries in the US.

While millions of people have subsequently watched Warner content on YouTube, the website is believed to contribute only a small amount of money back to the music group, and Warner executives have become increasingly frustrated with the negligible revenues. Months of negotiations broke down on Friday night.

YouTube said in a blog posting: “Sometimes, if we can’t reach acceptable business terms, we must part ways with successful partners. For example, you may notice videos that contain music owned by Warner Music Group being blocked from the site.”

Warner had been negotiating for an upfront payment, a share of advertising revenue and a “per stream fee” where it would be paid each time its content was shown.

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