Napster recently began selling tracks without digital rights managment
The number of subscribers to online music seller Napster fell between April and May, the company said.
It had 708,000 paying subscribers, 52,000 fewer than the firm had between January and March.
Under pressure from rivals such as Apple's iTunes, Napster's net loss grew by 2% to $4.38m (£2.3m) compared to the previous quarter.
The company expects its mobile phone service, Napster Mobile, to improve revenues in the second half of 2008.
Napster recently launched an online music store selling tracks as MP3s without digital rights management (DRM), which limits how the file can be copied or converted.
The move signalled a shift away from its subscription music service, which lets users access as much music as they wanted for a monthly fee.
"The introduction of MP3s into our line-up has created positive trends for Napster, with increases to visitation and user engagement," said Napster chairman and chief executive Chris Gorog.
Apple's iTunes remains the dominant music service, with 70% of the US market.