Warner Music Group said today that it narrowed its fiscal third-quarter net loss, citing reduced costs and the continued surge of digital download revenue. The record label giant's improving financial picture comes just a week after WMG and EMI Group both declared their lengthy, much-publicized takeover bids for one another on hold--for now.

For the quarter ended June 30, WMG posted a net loss of $14 million, or 10 cents per share, up from a net loss of $179 million, or $1.41 per share, a year earlier. The net loss from the year-ago quarter included costs related to the company's initial public offering. Excluding those costs, WMG's loss was 34 cents per share.

The improvement was largely driven by digital download sales, which continue to surge for WMG. The company said digital revenue for the quarter was $92 million, more than doubling from $44 million for the same period a year ago.

Digital sales accounted for 11 percent of the company's total revenue for the quarter, the same percentage as the prior quarter, when WMG reported $90 million in digital sales.

"We are the clear industry leaders in digital," WMG CEO Edgar Bronfman Jr. said on the company's earnings conference call this morning. "Warner Music Group is the only major music company that reported digital album share in the US above its physical album share for the June quarter and year to date."

Bronfman cited strong digital track sales, particularly those for Daniel Powter's "Bad Day" and Sean Paul's "Temperature," the two top-selling digital tracks of 2006.

Digital album bundles, or the tactic of tying a purchase of a digital album to concert ticket privileges or premium content, also boosted overall record sales, Bronfman said. He said sales from James Blunt, TI, Panic! at the Disco, Madonna, Daniel Powter, Sean Paul, Gnarls Barkley, and Red Hot Chili Peppers drive the companies revenue in the quarter.

WMG reported total revenue of $822 million in the quarter, up 11 percent from $742 million for the same quarter a year ago. Wall Street had expected a loss of 19 cents a share on revenue of $784.8, according to a survey of analysts by Thomson Financial.

On the conference call this morning, Bronfman declined to answer any questions related to the EMI talks, the single issue that has dominated the company's headlines for the past six months. WMG and EMI each had made multiple takeover bids of one another since May, the last of which were valued at approximately $4.6 billion each.

But when a European Court voided the 2004 European Commission approval of the merger between Sony Corp.'s Sony Music and Bertelsmann AG's BMG on July 13, forcing those two label giants to resubmit their application for regulatory approval, a large shadow was cast over the WMG-EMI proceedings. Both companies have stated that the talks are on hold for now.