In its fiscal third quarter, Warner Music Group continued to diversify its product mix but turned in revenue and earnings characteristic of an industry in a difficult transition. Total revenue dropped to $769 million, down 9% from the prior year quarter. Operating income from continuing operations before depreciation and amortization (OIBDA) fell 22% to $90 million. WMG reported a net loss of $37 million, or $0.25 per share.

"At a time when quarterly results are pressured by the macroeconomic downturn and the industry transition, we remain focused on prudently positioning ourselves to benefit when those pressures abate – by actively creating a new recorded music business model to diversify our revenue mix," said Edgar Bronfman, Jr., Warner Music Group’s Chairman and CEO. "We are making good progress on that effort. For example, we now have comprehensive expanded-rights agreements with more than half of our active global artist roster.”

Domestic revenue declined 10.3% while international revenue decreased 8.2%, but grew 5.3% on a constant-currency basis due primarily to an increase in revenue from the company’s European concert promotion business. Revenue growth in the U.K., France, Italy and Canada was offset by weakness in Japan and Latin America.

International Recorded Music revenue decreased 6.0% from the prior-year quarter to $345 million, but grew 7.8% on a constant-currency basis, while domestic Recorded Music revenue fell 11.0% from the prior-year quarter to $284 million. International Recorded Music revenue was bolstered by revenue from the company’s European concert promotion business.

Digital revenue of $175 million grew 5.4% over the prior-year quarter, or 10.8% on a constant-currency basis. Digital revenue grew 1.2% sequentially from the second quarter of fiscal 2009, or 2.3% on a constant-currency basis, and represented 22.8% of total revenue for the quarter.

Revenue from the company's recorded music business declined 8.3% from the prior-year quarter to $629 million, and was down 1.6% on a constant-currency basis. The decline in constant-currency revenue primarily reflected strength in parts of Europe and Canada, driven largely by carry-over sales of domestic product, and sales of local repertoire in France, Germany, the U.K. and Italy, offset by weakness in the U.S., Japan and Latin America.

Recorded music digital revenue of $163 million grew 4.5% over the prior-year quarter, or 8.7% on a constant-currency basis, and represented 25.9% of total Recorded Music revenue, compared with 22.7% in the prior-year quarter. Digital revenue from domestic recorded music amounted to $105 million, or 37.0% of total domestic Recorded Music revenue, compared with 31.7% in the prior-year quarter.

Music publishing revenue fell 12.5% from the prior-year quarter to $147 million, and declined 4.5% on a constant-currency basis. Music publishing revenue declined 6.9% domestically and was down 15.5% internationally, or 3.1% internationally on a constant-currency basis. Digital revenue from the music publishing business grew 60.0% to $16 million, and was up 100.0% on a constant-currency basis, representing 10.9% of total publishing revenue.

A small net loss was widened by interest expense that included $18 million, or $0.12 per diluted share, of previously unamortized deferred financing fees related to the company’s senior secured credit facility. These fees were written off in the current quarter when the company repaid the credit facility in full.

The company reported a cash balance of $345 million as of June 30, 2009. On May 28, 2009, the company completed a $1.1 billion senior secured bond offering, the proceeds from which, along with $335 million of existing cash, were used to retire the company’s senior secured credit facility, which had a maturity date of February 28, 2011. Free cash flow was $11 million, compared to $93 million in the comparable fiscal 2008 quarter.

Shares of WMG were down less than 1% in early trading today.