Michael Stipe's band R.E.M. are signed to Warner

The US music group, which this week rejected a $4.2bn (�2.3bn) takeover bid from EMI, earned $90m from internet sites such as the iTunes music store.

That was almost treble its digital sales from a year ago and represented 11% of revenue for the quarter.

However, Warner lost $7m in the first three months of 2006.

This compares with a $4m profit in the same period last year.

The group, whose other artists include Green Day, The Flaming Lips and REM, saw revenue climb 3.7% to $796m.

Merger talk

Analyst Laura Martin of Soleil Media Metrics said the figures were "excellent" for the industry.

She added it meant EMI would have offer to between $30 and $33 a share if it planned a another takeover bid.

The British group's �28.50-a-share proposal was turned down after Warner decided it was not in the interests of its shareholders.

Its approach came six years after attempts to merge EMI and Warner Music were blocked by European competition regulators.

A merger between the two has long been on the cards, in an attempt to compete more effectively with larger rivals Universal Music and Sony BMG.