Madonna is one of Warner's biggest name artists
Warner Music Group, the world's fourth biggest record firm, has seen its losses widen as more people downloaded music rather than bought its CDs.
In the third quarter ending in June the company lost $17m (£8.4m), against $14m at the same time a year ago.
Revenue fell 2% year-on-year to $804m from $822m, after what WMG boss Edgar Bronfman said had been a "challenging quarter" for the music industry.
Shares in WMG fell 68 cents, more than 6%, to $10.35 in New York trading.
Warner, whose artists include Madonna, REM and P Diddy, is to restructure its recorded music business to free up cash for areas such as digital distribution.
Like other firms, it has suffered as consumers bought fewer CDs.
The New York-based company said digital revenue increased 29% year-on-year to $119m, or 15% of total revenue, in the quarter.
Revenue from recorded music overall fell 4% to $653m, as sales fell in the UK, France and Canada. But stronger sales were experienced in Japan and Spain.
Albums by Linkin Park, Michael Buble, T.I., The Traveling Wilburys and The White Stripes were among Warner's biggest sellers during the quarter.
Mr Bronfman said the firm had backed away from a bidding war for Britain's EMI Group because the market had created expectations for a price that "we couldn't justify".
Private equity firm Terra Firma Capital Partners recently bought EMI for $4.9bn.