Major record label Warner Music, who own recordings from artists as diverse as Muse, A-Ha, Dragonforce and the Monkees, has threatened to stop licensing its music to free streaming services like Spotify, and Pandora.

Warner's CEO, Edgar Bronfman Jr, said: "Free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed. The get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price strategy, is not the kind of approach to business that we will be supporting in the future".

The company has not yet confirmed whether it will be withdrawing its catalogue from existing streaming services - neither We7 or Spotify had responded to our emails at the time of writing. But Spotify's US launch is almost certainly in jeopardy - CEO Daniel Ek's recent tweets sound like he's not been having a fun time.

Warner's motives are puzzling. While 95% of Spotify's 7 million users opt for the free option rather than a subscription payment, there's got to be considerable value in an exceptionally well-targeted advertising network. If it can sustain Google, it should be able to sustain Warner - especially as Spotify's ads are hard to ignore.

Warner's latest financial figures show that the company haemorrhaged £11 million in the last quarter of 2009 and CD sales are continuing to shrink. However, digital sales are up, and 2009 was the biggest single sales year ever, so things can't be said to be all doom and gloom.

And Bronfman's comments come shortly after Rob Wells, SVP of Universal - the largest of the major labels - said that "Spotify is a very sustainable financial model - full stop", and neither Sony Music nor EMI have expressed any dislike for the Swedish startup.

We'll keep you posted of this developing story.

Update: Both We7 and Spotify have got back to us. Spotify said: "WMG is not pulling out of its current agreement with Spotify in Europe". Reading between the lines, that suggests the difficulties are confined to the US, though being the world's biggest music market that could still have repercussions on the rest of the world.

We7 told us: "Edgar's comments are more to point out where the current digital priorities are, which is to focus on access and subscription services. The wider picture is about value and choice, and ad-funded services such as we7 have a significant role to play and will continue to gain momentum, but not in isolation".

"Different economic models will work together in a symbiotic way so they feed rather than cannibalise each other eg Ad-Funded feeds into Paid Subscriptions and into MP3 Sales and added value items. We7 offers all of these in one place".