Lou Reed of Lou Reed's Metal Machine Trio performs during their "A Night of Deep Noise" concert in Palma de Mallorca April 30, 2010. REUTERS/Enrique Calvo

By Jonathan Allen and Chris Michaud

NEW YORK (Reuters) - Lou Reed, the pioneering songwriter and musician behind the Velvet Underground, one of the most influential rock bands which fused art and music in collaboration with artist Andy Warhol, died on Sunday at the age of 71, his literary agent said.

Reed died at a home he shared in Long Island, New York, with his wife Laurie Anderson following complications from a liver transplant he had earlier this year, Andrew Wylie, the agent, said.

"I think Lou was as great an artist as it was possible to be," Wylie said. "It's a great loss."

While the Velvet Underground never achieved great commercial success, the band revolutionized rock in the 1960s and 70s with a mixture of thrashing guitar licks and smooth melodies sung by Reed or the sultry German model Nico, who briefly collaborated with the band at Warhol's insistence.

The band has long been recognized as a major musical influence on punk art and rock, as reflected in a quote often attributed to musician Brian Eno: "The first Velvet Underground album only sold 10,000 copies, but everyone who bought it formed a band."

John Cale, who co-founded the Velvet Underground but had a sometimes fractious relationship with his former bandmate, released a statement on his Facebook page: "The world has lost a fine songwriter and poet…I've lost my 'school-yard buddy'," he said.

Cale and Reed put aside their differences to release a tribute album to Warhol in 1990 called 'Songs for Drella', which lead to a handful of reunion performances of the Velvet Underground's original line-up in the early 1990s.

Musician Iggy Pop's official Twitter account called the news "devastating", while musician Kim Gordon of Sonic Youth tweeted: "So sorry to hear of Lou Reed's passing this is a huge shock!"

An admitted hard drinker and drug user for many years, Reed underwent a liver transplant earlier this year at the Cleveland Mayo Clinic, his wife, Laurie Anderson, told The Times of London after he had canceled five California April concert dates.

"I am a triumph of modern medicine," Reed posted on his website on June 1, 2013, without directly acknowledging the transplant. "I look forward to being on stage performing, and writing more songs to connect with your hearts and spirits and the universe well into the future."

LYRICS THAT SHOCKED

Reed shocked with lyrics that chronicled sex and drugs, notably in "Heroin" in which Reed declares, "It's my wife, and it's my life," and in Reed's only Top 10 single, "Walk on the Wild Side," one of several songs referencing transsexuals.

"Sister Ray" - a 17-minute blast of guitar distortions - combined stories of sailors, oral sex, murder, intravenous drug use and the mysterious title character.

"I never in a million years thought people would be outraged by what I was doing," Reed said in a 1989 interview with Rolling Stone. "You could go to your neighborhood bookstore and get any of that."

One of his signature songs, first performed by the Velvet Underground and later a staple of his solo act, was simply titled "Rock and Roll," a semiautobiographical story of how music saved the life of a young fan listening on the radio.

His avant-garde act in a dog collar and eye makeup opened the door for artists such as David Bowie to take androgynous looks into the mainstream.

It was personified in the landmark live album "Rock 'N' Roll Animal," released in 1974. That record closely followed the studio-record rock opera album "Berlin," which he brought to life again with a 2006 concert that was made into a 2007 film directed by Julian Schnabel.

Later in his career, Reed became an elder statesman of rock, a towering figure in a club with legends such as Bob Dylan and Neil Young.

Reed always placed great importance on song-writing. One of his first jobs out of college was as a staff writer for Pickwick Records. He dedicated the 1966 Velvet Underground song "European Son" to the late poet Delmore Schwartz, under whom he studied at Syracuse University.

Reed was married three times, the latest to recording and performance artist Laurie Anderson in 2008, and in recent years took an intense interest in photography, staging exhibitions of his work.

(Writing by Cynthia Johnston and Daniel Trotta; Editing by Nick Zieminski, David Brunnstrom and Diane Craft)