Former filesharing service Napster is shaping up to be a hot commodity once again with news that it’s Q3 profit deficit is lower the same period a year before. The one-time filesharing giant in Q3, the three months ending December 31 2007, posted losses of $2.8 million, or 6 cents per share. Compare that with the year before when Napster posted losses of $9.5 million and you can see the difference.

Napster attributes its improved financial situation thanks to a 15% increase in revenue from subscriptions. Napster sells access to a monthly-subscription service that allows subscribers to download legal MP3 music that can be played on some digital music players.

Napster’s Q3 revenue was $32.8 million and the service currently has about 743,000 subscribers. Revenue in Q4 is expected to be between $29 million and $31 million, although analysts had predicted $35.2 million.

While things are getting better for Napster and it is doing a roaring trade in legal MP3 downloads, the company is still operating at a loss.

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