The music retailer posted a smaller than expected 10 cent-per-share loss as it added about 17,000 new subscribers to its subscription service.

Big strides have been made in efforts to pare losses. The company lost $4.3 million in the three months ending March 31, about half of its $8.5 million loss in the year ago quarter.

At that time, the company was fresh off of settling with EMI over copyright infringement which likely had some downward drag on its financials. Additionally, the company was dealing with abandonment by Microsoft, who had recently turned to its Zune player which is incompatible with Napster.

Revenues were also up, albeit slightly. The company made $30.8 million during the quarter, up about six percent from a year ago. Such slow growth may have a lot to do with the company's recent announcement of its MP3 store.

Napster announced back in January that it would return to selling MP3s, which play on any player -- including the ubiquitous iPod and the iPhone -- in a move to expand its customer base. With its inventory of tracks expanding to six million, it's not a far-fetched prediction far-fetched that the company could see large gains in the quarter to come.

"We believe the launch of our MP3 store, the flexibility of our new Web-based platform, and the continued growth of Napster Mobile will drive our business in fiscal 2009 and beyond," CEO Chris Gorog said.

By the books, Napster is not holding its breath though: It's only forecasting revenues of $30 to 31 million. The Street is a bit more bullish, as analysts polled by Reuters expect revenues to be around $31.6 million.

A narrower loss is still a loss, investors decided Thursday, as Napster stock on the NASDAQ lost over 10% of its value by 10:30 am EDT, before settling back to about a 9% loss by 2:10 pm EDT.