Warner Music Group, the world's third largest music company, posted a narrower-than-expected quarterly loss on Thursday as growth in digital services overshadowed the decline in music CD sales.

Net loss for the fiscal second quarter ending in March was $25 million, or 17 cents a share, compared with $68 million, or 45 cents a share, a year earlier. Revenue fell by 1 percent to $662 million.

Wall Street analysts had, on average, forecast a loss of 30 cents on revenue of $663.3 million, according to Thomson Reuters I/B/E/S.

Sales from recorded music fell 0.9 percent from a year earlier, on weakness in the U.S., Asia and Europe, partially offset by strength in the United Kingdom.

Top sellers in the quarter included Michael Buble, Muse and French artist Christophe Mae.

Digital recorded music sales rose by 13.9 percent to $189 million, and now accounts for nearly 35 percent of total recorded music sales during the quarter.

Revenue at Warner/Chappell music publishing, the unit which manages songwriters and song licensing, declined 1.5 percent to $134 million hurt by the decline in CD sales.

Warner Music has been widely speculated as a potential bidder for assets of smaller London-based rival EMI Group, home of artists like the Beatles and Coldplay. EMI's private equity owner Terra Firma is currently seeking financing to ensure it retains ownership in the face of a mounting debt load.

Shares of Warner Music have risen about 22 percent this year.

(Reporting by Yinka Adegoke and Franklin Paul; Editing by Derek Caney)

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