Downtown Records has inked an exclusive distribution deal with Fontana and has also entered a strategic relationship with Interscope Records, Billboard has learned.

Under the agreement, Interscope will provide strategic marketing and promotion for select albums. Cold War Kids, Eagles of Death Metal, Kid Sister, Mos Def, Spank Rock, Amanda Blank, Carla Bruni, MSTRKRFT, Femi Kuti, Asa and all the acts signed to Downtown's three distributed labels-Dim Mak Records, Fools Gold Records and Mercer Street Records-will be distributed by Fontana.

Downtown acts Gnarls Barkley and Kevin Michael will remain part of the label's existing upstreaming alliance with Atlantic Records and will continue to be actively worked by Downtown and Atlantic. Santogold, Justice (Because/Downtown) and Brett Dennen (Dualtone/Downtown) will continue to be distributed by the Alternative Distribution Alliance.

Not affected by the deals is Downtown's publishing arm, which owns or controls more than 3,000 titles recorded by acts including Aretha Franklin, Mary J. Blige, 50 Cent, "Hannah Montana" star Miley Cyrus and the cast of "High School Musical 2," as well as writer/artists signed to Downtown Records such as Dennen, Cold War Kids, Spank Rock and Carla Bruni.

The first record to be released under the new agreement will be Cold War Kids' "Loyalty to Loyalty," which streets Sept. 23. Downtown co-founder/CEO Josh Deutsch says that albums from Eagles of Death Metal, Mos Def, Kid Sister and MSTRKRFT are all slated for fourth-quarter releases.

"Downtown has a huge release schedule, and we're very excited to start working the records," Universal Music Group Distribution (UMGD) CEO Jim Urie says. "I've admired Josh for a long time, and we wanted them onboard.

They're exactly the type of label we started Fontana to do business with." Deutsch says that "Fontana has such enthusiasm for Downtown's artists, and we have a common vision about how best to work our upcoming releases."

A source close to the situation says that Fontana paid a $1.5 million advance for distribution, with Interscope throwing in another $1 million for its role, paid incrementally. Urie says the deal has a term of three years.

Recent releases by Downtown artists haven't been huge sellers. The last Cold War Kids album, "Robbers & Cowards," has sold 169,000 copies, while Eagles of Death Metal's 2006 album, "Death by Sexy," has moved 72,000 units, according to Nielsen SoundScan. The picture is much the same for the most recent releases from Mos Def and MSTRKRFT, who signed to Downtown and Dim Mak, respectively, during the past year. Mos Def's "Tru3 Magic" (Geffen) has shifted 72,000 units, while MSTRKRFT's "The Looks" (Last Gang) has moved 18,600.

Deutsch, however, stresses that sales figures provide only part of the story. "You look at the Cold War Kids and you can see a tremendous long-term artist development story," he says. "Our roster represents the next generation of artists to cross over. I would love to see people move away from focusing on first-week and first-album sales numbers, especially when discussing developing acts."

Deutsch points to Eagles of Death Metal, who sold 18,600 copies of their first record, 2004's "Peace, Love and Death Metal," and then sold nearly four times as many units of their second effort.

Urie says that "it's good to be in business with labels like Downtown, who are hungry," adding, "They bring great indie cred and a wonderful management team, and they are a high-visibility label."

What can Fontana offer Downtown? "The whole concept of Fontana is different," Urie says. "Our goal is to use all the resources that Universal has to offer. Labels have access to retail partnership marketing and nontraditional sales areas. We give indie labels the leverage and access, because we believe that Fontana is an integral part of UMGD."