The Universal Music Group saw a 5.3% drop in sales to 1.02 billion euros ($1.6 billion) in the quarter ended June 30, from the 1.07 billion euros ($1.4 billion) generated by the company in the preceding quarter.

But on a constant currency exchange rates, which eliminates currency fluctuations impact on revenue, it translated into a 3% gain.

Highlights for the company included a 33% increase in digital sales (which it didn’t specify the amount) for the quarter, as well as an increase in license income, which offset the physical sales drop, according to the company.

The company’s revenue increase on a constant currency basis can also be attributed to the acquisition of Sanctuary in September 2007 and the BMG publishing unit at the end of May 2007.

For the first six months of the year, UMG generated 2.04 billion euros ($3.23 billion) a 2.4% drop from the 2.1 billion euros the company garnered in the first half of 2007. On a constant currency basis, revenue grew 4.9% according to the company.