Warner Music falls 12 percent on downgrade

NEW YORK (Reuters) - Shares in Warner Music Group fell as much as 12 percent in early trading on Monday after Goldman Sachs analysts' downgraded the company's stock to a "sell" rating from "neutral."

Ingrid Chung, media analyst at Goldman Sachs, said her team does not see any near-to-intermediate term improvement in prospects for the music industry with U.S. album sales down 11 percent in both the first quarter and second quarter.

Warner, the third largest music company in the world, is home to artists such as Madonna, R.E.M. and Red Hot Chili Peppers.

"We believe that Warner Music Group will find it increasingly difficult to improve its U.S. market share after six straight quarters of doing so," said Chung in a note to clients.

Chung believes it will also be increasingly difficult for Warner to manage costs as revenue continues to decline.

Warner will post its fiscal third quarter earnings on Thursday.

Shares in Warner fell 71 cents to $7.55 on the New York Stock Exchange, after falling as low as $7.24 earlier in the session.

(Reporting by Yinka Adegoke; Editing by Derek Caney)