Q&A: INgrooves CEO on digital distribution and Dolly

INgrooves, a digital distribution company, is fast becoming a favorite of music acts embarking on comebacks.

Last year, San Francisco-based INgrooves oversaw digital distribution and marketing for the release of Dolly Parton's album "Backwoods Barbie." The record debuted as the No. 1 country album on iTunes. This spring, when the spoof metal group Spinal Tap releases its first album since 1992, the boys in the band are trusting INgrooves to distribute the material to iTunes, Amazon, and other online retailers.

But just don't call the privately held INgrooves a music label. "I don't like the label... label," quipped Robb McDaniels, the company's CEO.

McDaniels says INgrooves is a service company that acts much like an indie record company, such as IODA or The Orchard, but has no wish to compete against record labels. And in fact, one of the 7-year-old company's most important clients is Universal Music Group, the largest of the top four recording companies. Universal last year invested in INgrooves.

McDaniels recently spoke with CNET News to discuss where digital distribution was headed.

Q: Do you consider yourself a label?
McDaniels: I don't like the label...label. We provide some services that an artist would expect from a label. We provide some services that an independent label would expect from a major label. I think we are as good as anyone out there in terms of digital distribution and marketing.

So, if I'm a label or artist, I hire you to do what?
McDaniels: We're agnostic to whether you're a label, artist, production company; really we work for anybody that controls the rights to media, images, video, and of course audio.

We provide sort of a menu of services that you can pick and choose from. It starts with distribution and it's really the entire supply chain process for content managers. What we've built is more of an asset management system rather than just a distribution infrastructure.

Tell me about what you're doing for Nokia.
McDaniels: This is an extension of our deal with Nokia for their online stores. Comes With Music is their new initiative based out of the United Kingdom but I understand it's about to launch in the U.S. and a few other territories. It's another retail outlet for us. It's another way to reach the consumer and a great outlet for our independent music. We sort of approach the retail model in much the same way we approach the client model. We're agnostic to the manner to in which music fans consume music.

Spotify is one of your distribution partners. That's the site everybody is talking about in Europe right?
McDaniels: We've just signed Spotify. There certainly has to be a music solution out there that's getting all the buzz. In the seven years we've been doing this I can't tell you the number of times that one of my employees has come into my office and told me this is going to change the way we consume music or this is going to spell the end of us. Snocap was one at one point. Spotify is certainly getting all the buzz now. It's a streaming-based model that allows music fans to effectively access millions of songs and share playlists and I think their music interface is catching on with fans.

I think what's really happening is consumer behavior patterns are changing. It used to be when we're moving from the CD to the digital download everybody was saying that music fans still want to hold something, hold the physical good in their hand and that's why CD sales would stay strong. Now consumer behavior is moving more towards digital downloads and everybody is saying everybody wants to own the download and they want to carry it with them wherever they go and streaming models aren't going to take off. Well now the consumer is saying I don't need to own the download. I'm happy with a cloud model where all my media is housed somewhere in an Internet locker for me and I can access it at any time. One of the reasons that consumer behavior is changing is because streaming is becoming more portable and interoperable.

I can access that music for more devices and more places and so it's becoming more convenient. I think that Spotify is hitting the market at the right time. I don't know it's that novel of an idea but I think it's got great timing and great user functionality.

Tell me what artists you work with and give me an example of what you do for them.
McDaniels: We provide services to Universal Music Group, K-Tell and VP Records as well as successful artists that are going out on their own: people like Dolly Parton and Too Short. We did Dolly Parton's last release worldwide digital. Dolly formed her own label called Dolly Records and was looking for a digital partner for distribution and digital marketing. We signed her to an agreement and she opted into our worldwide digital distribution and our strategic marketing services. Our marketing group did an analysis of which retail partners would be the best ones, would do exclusives on the Dolly album, "Backwoods Barbie." We then set about executing the marketing plan leading up to the release and then pushed it out to all of our online and mobile outlets on the day of the release. It was Dolly's highest Billboard debut ever. We did very well digitally for her. The album has gone on to sell over 130,000 copies.

Who else have you done that for?
McDaniels: Artists we've worked for directly are Too Short, Tila Tequila, Snoop Dogg's Doggystyle Records, Thievery Corporation, and the Crystal Method.

What are you doing for Universal?
McDaniels: About a year ago they made a strategic investment in us and we are providing them with digital distribution services. They looked at our software platform and they felt that it would be the right thing for the delivery of their content in North America. What our system does is handle the Universal Music Group Distribution labels and we deliver all their content under their contracts in all of North American retailers.

You're doing only UMGD. Why aren't you doing delivery for all of its labels, such as Geffen?
McDaniels: Universal is obviously a very big client for us. They have a large catalog. The digital logistics business is very complex. Nobody really other than the people involved understands the complexities involved. To take on that large of a catalog with all the intricacies of distributing out to dozens if not hundreds of different retailers is a large undertaking so we decided to stage the migration of their catalog to our system.

What is your relationship like with retailers and services such as YouTube?
McDaniels: We deliver content into YouTube, audio and video, for INgrooves clients. We sit in the middle. We're like a clearinghouse between content owners, typically labels or artists, and online and mobile retailers. We're like the Visa of media. We receive back from all of the retail channels all of the sale statements and process all of the paybacks to the content owners. We see all of the sales data, all of the content. We know who's buying what, where, when and how much.