UMG's indie distribution arm will become part of INgrooves-Fontana

In a move signaling the continuing shift from physical to digital sales in the music biz, San Francisco-based digital distributor INgrooves has acquired Universal Music Group’s indie distribution arm Fontana Distribution.

Terms of the deal, which had been widely rumored within the industry in recent weeks, were not disclosed.

San Francisco-based INgrooves has handled digital distribution of Fontana’s product since 2008, employing its proprietary ONE Digital software platform. UMG holds a minority equity stake in INgrooves.

The new entity, dubbed INgrooves Fontana, will move to a new facility in Los Angeles. It will be headed by INgrooves prexy Dave Zierler and Fontana prexy Ron Spaulding, and will continue to employ Fontana’s sales force. Combined staff numbers around 120.

INgrooves CEO Robb McDaniels said in a statement, “Through this acquisition, we are now able to offer the independent music community a fully integrated physical and digital distribution marketing solution in North America.”

McDaniels added, “By combining INgrooves and Fontana, we will be able to extend this philosophy into a comprehensive distribution operation that provides our collective client base with a larger sales force, more marketing resources and a one-stop global retail network that maximizes opportunities in this dynamic, challenging environment.”

The combined INgrooves Fontana roster of distributed labels includes Nettwerk, Vagrant, Fat Possum, Dangerbird, Six Degrees, VP, Dualtone, ESL, Rap-A-Lot and Downtown.

In November, rapper Mac Miller’s Rostrum Records album “Blue Slide Park,” which was handled jointly by INgrooves and Fontana, debuted at No. 1 on the U.S. chart.

While the majors enthusiastically embraced distribution of third-party indie labels during the ’90s and ’00s, the melding of Fontana, which was founded by UMG in 2004, with its digital distributor indicates ongoing adjustment in the industry as online sales grow and the brick-and-mortar retail base for CD sales continues to shrink.

The other major label groups have increasingly stepped back from indie distribution in recent years.

Warner Music Group folded its two indie distributors, Alternative Distribution Alliance and Ryko Distribution, into one entity largely employing WEA’s sales force, while EMI Music’s Caroline Distribution was absorbed by the firm’s main distribution arm. Sony Music Entertainment continues to operate an indie division, RED Distribution.

INgrooves’ acquisition of Fontana also trims a significant asset from UMG’s holdings. The company’s $1.9 billion bid for EMI’s label assets is currently being weighed by U.S. and European regulators, and it is widely believed that large divestitures would be required if the deal is to be consummated.

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