Acquisition Rumors Now Surround IRIS Distribution

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.”

7 Responses

  1. Adam Jones

    I believe that the “The indie aggregator is also a failed business model” is just crazy. However, there are a lot of competitors in the space.

    RouteNote and Believe Digital are the leaders in Europe, which seems to be overlooked at the moment by the major labels. All acquisitions are between US companies who are fighting over a limited market.

    • Digitalbod

      US is pretty much 50% of the digital market in terms of revenue, so its not surprising thats where the action is.

      Believe are surely looking to exit when there is a decent offer, but are they near profitability yet? Large expansion hasnt seemed to reap much reward yet. In terms of label aquisitions they have very few top tier accounts and a huge chunk of their catalogue is DIY artists via the Zimblam platform.

      Routenote a leading distributor, really?!

  2. aggregators

    Zebralution was bought by Warner 4 or 5 years ago and are a big force in Germany. finetunes and kontor are both very healthy and mostly service Germany and part of Europe, IDOL in France also healthy.

    One RPM and ditto Music seem to be going after Tunecore’s model.

    Many new music services like spotify and rdio don’t seem to want to have alot of labels working direct with them so the aggregator seems to still be important.

  3. lifer

    “Failed business model” and “fictional crap” is very similar to the language publishing and label execs use when belittling people on the other side of a negotiation.

    It’s called driving the price down.

  4. musicservices4less

    If you have any sort of a name nationally as an indie label and you are not in direct contract with iTunes, you need to re-evaluate your business plan.

  5. @lacupulamusic

    Un sobredosis de consolidación en el mundo de los agregadores? Nosotros nos mantenemos realmente independientes!