Warner Music, whose artists include Madonna and James Blunt, has reported lower-than expected losses thanks to the success of digital downloads. The US music group, which this week rejected a $4.2bn 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. Warner Music has the rights to more than a million songs via its publishing arm Warner/Chappell Music.

The Beatles have lost their court challenge against Apple Computer over its iPod and iTunes download service. Sir Paul McCartney, Ringo Starr and the families of George Harrison and John Lennon control the Apple Corps label. They claimed the US firm broke a deal aimed at ensuring there would not be two Apples in the music industry. But Justice Anthony Mann ruled that the computer company used the Apple logo in association with its store, not the music, and so was not in breach. The ruling means iPods and iTunes will still be able to carry the Apple name and logo. The Beatles' label, which wanted London's High Court to award damages and stop its rival using the Apple logo in its music operations, will appeal.  Justice Mann ruled iTunes was "a form of electronic shop" and not involved in creating music. "I conclude that the use of the apple logo ... does not suggest a relevant connection with the creative work," he wrote in his judgment. "I think that the use of the apple logo is a fair and reasonable use of the mark in connection with the service, which does not go further and unfairly or unreasonably suggest an additional association with the creative works themselves." Apple Corps must pay its rival's legal bill, estimated at $4m, but the judge refused an interim payment of $3M pending further hearings. Exclusive rights: The record label said the rise of iTunes broke an agreement the two sides hammered out in 1991 after their last dispute. That deal gave the record label exclusive rights to use the apple trademark for the record business, Geoffrey Vos QC, representing Apple Corps, told the court. Apple Computer, whose products helped launch the personal computer industry, was founded in 1976 and its logo is an apple with a section removed from the side. Apple Corps was set up by The Beatles in 1968 and is represented by a complete green Granny Smith apple. Apple Corps manager Neil Aspinall said: "With great respect to the trial judge, we consider he has reached the wrong conclusion. "We felt that during the course of the trial we clearly demonstrated just how extensively Apple Computer had broken the agreement. "We will accordingly be filing an appeal and putting the case again to the Court of Appeal." Apple Computer chief executive Steve Jobs said: "We are glad to put this disagreement behind us. "We have always loved The Beatles, and hopefully we can now work together to get them on the iTunes Music Store." The launch of the iPod, a portable digital music player, in 2001, and its iTunes music store two years later, prompted the latest battle. Court download: About three million songs are downloaded from the service every day. Tracks by The Beatles have not been licensed for downloading and are not available on the service. Vos demonstrated how to use iTunes during the hearing - downloading Chic's 1978 disco hit Le Freak in the courtroom. He pointed out to Justice Mann how many times the Apple logo appeared on the computer screen as he went through the process.
 

Mission: Impossible III dominated global box offices at the weekend, taking an estimated $118m  But it performed worse in the US and Canada than overseas, leading some reports to dub it a disappointment. It made $48m in ticket sales at North American cinemas between Friday and Sunday, studios estimated. That would mean 7.3 million people saw the movie - compared with 10.7 million for the last film and 10.3 million for the first Mission: Impossible. But the previous two installments opened on holiday weekends, when attendances are generally higher. Film company Paramount pointed out the film's global takings were up on the $115m  debut for Mission: impossible II. Paul Dergarabedian, president of box office tracking company Exhibitor Relations, said: "Expectations were really high for this film. "I think it's a good number, but people were obviously expecting better numbers." The film still had the second most lucrative opening weekend for any movie this year so far. It could not match Ice Age: The Meltdown, which opened with $68m  last month. Cruise embarked on a series of high-profile promotional trips for the film shortly after becoming a father with actress Katie Holmes. Paramount head of worldwide marketing and distribution Rob Moore said he did not think Cruise's private life had any impact on the film's box office performance. "I don't think so," he said. "There's no question it concerns us if the press is writing about things other than the movie. "If people are writing about his personal life, then by definition, they're not writing about the movie." Mission: Impossible III also stars Oscar winner Philip Seymour Hoffman and is the first feature film to be directed by Lost and Alias creator JJ Abrams. A distant second in the North American box office chart, comedy RV took an estimated $11.1mover the weekend. Horror film An American Haunting was a new entry at third, earning $6.4m