NEW YORK: Cult online video sharing website YouTube has signed its first commercial partnership with the giant Warner Music Group.

The site's users will be allowed to legally incorporate music from Warner's catalogue - which includes Madonna and the Red Hot Chilli peppers - into the videos they create and upload. The partners will share any revenue generated by advertising to be featured around the videos.

Around 100 million user-generated clips are watched on YouTube every day. Comments its ceo and co-founder Chad Hurley: "By providing a new distribution opportunity, we are paving the way for media companies to harness the vast financial potential of user-generated content on YouTube. We are very excited. This is a real landmark for our company."

Adds Warner Music chairman Edgar Bronfman Jr: "Consumer-empowering destinations like YouTube have created a two-way dialogue that will transform entertainment and media forever."

The site itself, though hugely popular, has so far stayed afloat with $11.5 million (€9m; £6m) in venture capital funding. It was started by two 20-something friends in a Silicon Valley garage 19 months ago. Pressure is now on for it to become not only self-supporting, but also profitable.

The agreement with Warner comes shortly after YouTube and social networking site My Space were threatened with legal action by Universal Music Group over compensation for alleged copyright infringements.

Data sourced from Financial Times online; additional content by WARC staff