Perhaps Greg Scholl faced an impossible mission.  But instead of a profitable expansion, the Orchard is now facing widening losses and a slimmer cash position.  In a hardscrabble environment that favors smaller overhead, big asset acquisitions like TVT are proving problematic.  So are short-term survival strategies that rely on bank-issued debt.

But more importantly, digital music monetization models are failing to produce a bonanza.  Selling music online, or even monetizing music experiences through advertising, is becoming incredibly difficult against a backdrop of cost-free ubiquity.

The Orchard pointed to a “slower than expected digital music market growth rate,” but it remains unclear when a more favorable trajectory takes hold.  Perhaps the current generation of assets requires a radical refresh, or a complete wave of disruption to introduce fresher possibilities.  In its recent quarterly filing, the Orchard listed permanent downloads, subscription downloads, subscription streams, and mobile services as major sources of income.  Others, including licensing and consulting were also discussed, though the mainline revenue sources have well-known scalability and growth issues.

This is more than just a Great Recession issue.  Forget about indie loyalty and Long Tail fantasies, because scaling digital revenues is difficult for the mainstream and niche alike.  That includes discrete purchases, ad-supported models, or more comprehensive, 360-degree approaches.  The Orchard was recently staffing into physical distribution, but suddenly, the company is chopping its headcount by 20 percent (16 staff, 5 consultants, various others), and betting a different CEO will reverse the course.

This is also more than just an Orchard issue.  The independent digital distribution sector is a tough business, even if marketing, consulting, physical, and publishing aspects are sprinkled on top.  INgrooves raced into the arms of Universal Music Group, and IODA is now hitched to Sony Music Entertainment.  The rest are struggling through some choppy terrain, and future shakeout is inevitable.

Then what?  This is a bigger music industry problem.  The billion-dollar monetization riddle remains largely unsolved, and this industry threatens to morph into a collection of cottage industries – some profitable, others simply based on passion.  The Orchard is no cottage, at least not yet, and its problems reflect the difficulties that come with aggressive expansion and attempts to scale in this environment.  The current mix of moneymakers are just not cutting it.

Paul Resnikoff, Publisher.