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Still Behind Hollywood Records

Walt Disney Co. Chairman Michael D. Eisner said Monday that the company remains “totally and completely” committed to building a “mainstream” record company, despite the departure of the division president and continued losses in Hollywood Records’ fourth year of operation.

The looming exit of Peter T. Paterno–which was announced over the weekend–called fresh attention to Disney’s cautious approach to the business now dominated by Time Warner Inc. and Sony Corp.Advertisement”

They’re neither fish nor fowl now; they’re not a real record company; they’re not a real . . . source” of fresh talent, said one industry lawyer. “You’ve got to be able to break new acts. No one wants to send their artists there.”

“We have been cautious,” Eisner said in a brief interview. But he added, “It’s too good a business for a creative company of Disney’s size not to be involved with.”

Hollywood Records was launched with fanfare in November, 1989, when Eisner declared that the cost of acquiring a record company had risen “beyond feasibility,” and he vowed to enter the business with a “carefully engineered start-up.”

In retrospect, several industry executives said Disney made several mistakes under Paterno, including trying to build too big of an organization at the outset. Disney also erred in the distribution deal it struck with Time Warner’s Elektra unit, because Elektra put no money into the venture and has been uncomfortable distributing acts that it played no role in developing, sources said.

In contrast, another start-up, Interscope Records, has built a successful operation with the leadership of producer Jimmy Iovine. Unlike Disney, Interscope formed a joint venture with Time Warner’s Atlantic Records for distribution. Interscope is now “the first or second choice of every artist,” said one industry lawyer.

via Disney Still Behind Hollywood Records : Music: Leadership change, losses will not deter company from building the start-up. – Los Angeles Times.

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