Warner Music Group, which is being bought by billionaire Len Blavatnik's Access Industries, reported a narrower-than-expected quarterly loss, helped by a 9 percent jump in digital revenue.
The growth in digital revenue primarily reflected strength in digital downloads and streaming, but mobile revenue continued to decline, the company said in a statement.
Its fiscal second-quarter net loss was 25 cents a share, while analysts had on average expected a loss of 28 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 2.4 percent to $682 million ahead of average forecasts of $598.4 million. Digital revenue grew to $220 million.
Top music sellers in the quarter included artists Bruno Mars, R.E.M and Wiz Khalifa.
Music publishing revenue at its Warner/Chappell unit rose 2.2 percent to $137 million, mostly driven by U.S. sales.
Last week, Blavatnik bid $3.3 billion, or $8.25 a share, for the world's third-largest music company, adding another media company to his empire that already has Russia's Admedia and Britain's Top Up TV -- a digital TV station -- as well as natural resources businesses.
According to regulatory filings, the merger agreement has a $56 million break-up fee in place to be paid by the music company if it pulls out of the Blavatnik deal. The clause makes it likely any other bidder would need to pay close to $9.00 a share to pay a premium over the break-up fee.
Warner Music's management, led by Chief Executive Edgar Bronfman, hope that by taking the business private it can take bigger strategic gambles to cope with ongoing declines in the music industry. The music business is still struggling with a decade-long transition from physical formats like the CD to digital distribution through services like Apple Inc's iTunes.
The merger deal is set to close in the third quarter and it is widely expected that Bronfman and Blavatnik, who is a long-time associate, will turn their attention to rival music company EMI Group as a possible buyout target. It is thought that combining Warner Music with EMI could generate hundreds of millions of dollars in cost savings.
EMI is currently owned by Citigroup, which took control of the music company earlier this year when its private equity owner Terra Firma defaulted on loans.
New York-based Warner Music's shares added about 2 cents to $8.21 in morning New York Stock Exchange trading.
(Reporting by Yinka Adegoke and Sayantani Ghosh in Bangalore; Editing by Maureen Bavdek)