Music labels continue to fade out slowly.

Warner Music Group (NYSE:WMG) is posting another soft quarter this morning. Fiscal third-quarter revenue fell by 11% to $878 million. Digital sales rose 20% to $171 million -- now accounting for a 19% slice of the revenue mix pie -- but it's no match for a 19% plunge in domestic revenue.

Twilight's theatrical release may have been a growth catalyst for vampire-wannabe hangout Hot Topic (NASDAQ:HOTT) and obscure movie studio Summit Entertainment, but releasing the flick's soundtrack wasn't enough for Time Warner. Sure, it's a hit, but it's no match for the Josh Groban holiday CD that sold four million copies a year earlier.

Warner's bass line isn't any sweeter. It posted a loss from continuing operations of $0.09 a share, before a gain related to the sale of its minority stake in artist management company Front Line to Ticketmaster (NASDAQ:TKTM).

Yes, Ticketmaster. The same Ticketmaster that is cranking up the rumor mill this week with buzz that it's in merger talks with concert promoter Live Nation (NYSE:LYV). Say what you will about the surcharge-slapped ticketing or event marketing industries, at least Ticketmaster and Live Nation have the gumption to get it. They have been brokering deals to line up their interests with musical artists beyond the sale of music itself.

Digital music is real. It's a high-margin beacon worth swimming to. However, as labels like Warner, Sony (NYSE:SNE), EMI, and Universal are quickly finding out: It's not enough.

The music world is changing. Artists no longer need to "get signed" to be heard, thanks to the level playing field opportunities of sites like Google's (NASDAQ:GOOG) YouTube and News Corp.'s (NYSE:NWS) MySpace.

Warner and its old-school cronies will need to evolve before they fade out completely.

Other ways to rock around the stock:

Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz once had his band signed to Sony's Columbia Records label. It didn't exactly pan out, but he's not bitter. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.