Due to stalled negotiations over licensing fee, Warner Music Group ordered YouTube – Internet’s dominant video site - on Saturday to remove all music videos by its artists from the popular online video-sharing site. The order covers Warner’s recorded artists, along with the rights for songs published by its Warner/Chappell unit.

The negotiations broke down because Warner wants a bigger share of the huge revenue potential of YouTube’s colossal visitor traffic – it had more than 100 million viewers in the US alone in October.

Under terms of YouTube’s contracts, the labels stand to collect either a minimum fee of less than a penny each time a music video is watched or a split of advertising revenue, whichever sum is greater. Warner said: “We simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

Nevertheless, issuing a brief statement, Warner said it was working to find a resolution with YouTube that would return the content of its artists – including Madonna, rapper T.I., Red Hot Chili Peppers and Linkin Park - to the site.

Meanwhile, on its company blog, YouTube alerted its audience of the contract impasse, noting that professionally produced music videos, and also those that fans create using Warner songs, would begin to disappear from its site. In its online message to users, YouTube wrote: “Sometimes, if we can’t reach acceptable business terms, we must part ways with successful partners.”

Incidentally, Warner was the first of the major labels to strike a licensing deal with YouTube in 2006. Its executives think its cooperation lent legitimacy to the video website, setting the stage for the $1.65-billion acquisition of YouTube Inc. by search giant Google Inc.