Overdosing on consolidation, acquisition, and general industry collapse?
Well, now there’s this: over the weekend, several top-level executives pointed Digital Music News to an expected acquisition deal involving IRIS Distribution. The Orchard was repeatedly cited as the acquirer, and this is a rumor that’s been percolating for months. In fact, one source close to the dialogue pointed to near-complete or even sealed acquisition discussions between the parties.
Independent digital distribution is shrinking-n-merging, so let’s see how this shakes out. Several executives pointed to a broader rollup plan involving the recently-merged IODA and Orchard, one that features Sony Music Entertainment as a very significant stakeholder. In a statement to Digital Music News over the weekend, The Orchard denied that an acquisition has taken place – in the past tense – but seemed to leave the possibility of a future deal or announcement open. “There hasn’t been an acquisition,” an Orchard executive emailed. “Beyond that, we can’t discuss anything.”
IRIS has not yet responded to an inquiry, though there are differing versions of where this company stands financially. IRIS’ label roster is quite extensive, and includes Ninja Tune, One Note Records, Brooklyn Beats, Neptune Records, and Scion, just to scratch the surface. But is that paying the bills? One source close to the company noted that the problem isn’t profitability and growth – rather, it’s the level of profitability and growth. “It is indeed better than a zombie,” the source told Digital Music News. “But it’s like a successful small grocery store that makes more money every year.”
In other words, this is a real business – just not the type of hyper-growth, scalable story that investors chase. Which means that that this ‘grocery store’ is likely to become part of a ‘supermarket chain’ that attempts to create some economies of scale.
Which could mean that the once-overcrowded, independent label distribution space never quite made sense. The Orchard has been a frontrunner for years, though its business – just like rival INgrooves – now features significant major label control. “The indie aggregator is also a failed business model,” one disillusioned executive flatly told Digital Music News. “2012 is the reckoning for a ton of this fictional crap.”