Will Disney Enter the Wonderful World of Rock?

How does the name Touchstone Records grab ya?

That’s right--the Walt Disney Co. is preparing to get into the music business.

No one’s making any official announcements yet, but Disney’s plans to launch a major record label have been Topic No. 1 on the pop gossip circuit. In fact, Disney corporate bigwigs Michael Eisner and Frank Wells have been negotiating for weeks with Peter Paterno, a top music-biz attorney who is the leading candidate to head up the new Disney label.

“We’ve been talking and we’ll probably talk again this week,” confirmed Paterno, whose clients include Guns N’ Roses, Metallica and pop mogul Irving Azoff. “I’m certainly interested in pursuing the job. But no official decisions have been made yet. Let’s just say that as long as Disney is still interested, we’ll continue to talk.”

Disney’s corporate spokesman refused to discuss the impending label launch. But it’s no secret that Disney, which has expanded into virtually every other entertainment field, from cable TV to theme parks, has long sought to establish a beachhead in the pop field. Disney execs had initially explored buying A&M; Records, which was just purchased by PolyGram Inc.

“I talked to Michael and Frank two or three years ago about getting into the business,” said Joe Smith, president of Capitol-EMI Music. “They were talking to A&M; and EMI, but at the time it appeared they weren’t prepared to pay a premium for those companies.”

Instead, Disney apparently plans to start a label from scratch, a daunting proposition in an era where the industry is dominated by five huge conglomerates. According to sources close to Disney, the company would sign what is known as a production and distribution (P&D;) deal with an existing conglomerate, such as CEMA, PolyGram or Sony-owned CBS, to distribute Disney’s product. However, Disney would hire its own promotion, marketing and A&R; staffs.

The start-up costs for such a venture would be enormous. “It’s certainly going to be a challenge,” said John Sykes, whose Champion Entertainment management firm handles such artists as John Mellencamp and Hall & Oates. “But these Disney guys are smart business people. They see the tremendous upside of entering what’s now a $7-billion business in the U.S. alone. If they can find the right executive talent, they could have a real impact.”

Other top execs aren’t so optimistic. “They’re going to have to start at ground zero and go through the tortuous process of building artist careers, which can take years before it pays off,” said Smith. “And the Disney name doesn’t mean anything to a rock artist. I think these guys are going to spend a lot of money before you’re going to see anything happen.”

In fact, most industry leaders predict it will take Disney at least five years to turn a profit. “It takes hard work, some very talented people and a lot of luck,” said Geffen Records president Eddie Rosenblatt. “It takes a long time to establish credibility with radio, withrecord merchandisers and especially with your artists. A big key is building the perception of success. Because when you’re just starting up with your first record, if you make a mistake it really stands out--you can’t hide it among all your hits.” Other key observers question whether Disney, always a fiercely image-conscious corporation, has the stomach to do battle with anti-rock crusaders. “Forget about Tipper Gore,” said one top record exec, who asked to remain anonymous. “If Disney is serious about competing, they’re going to put out hard-rock albums that are going to freak out parents. Let’s see what happens if they ship a Slayer album and Rev. Donald Wildmon starts picketing Disneyland. I mean, can you imagine the kind of havoc it’ll wreak on the Disney lot when Rev. Wildmon decides to boycott Mickey Mouse?” (Mickey actually records for Disney’s tot-oriented Buena Vista label.)

Still, the choice of Paterno would give Disney instant credibility with the industry. A longtime attorney at the heavyweight Manatt, Phelps, Rothenberg and Evans law firm, Paterno represents nearly 50 clients, including a host of hard-rock artists and such hot labels asDelicious Vinyl and Enigma Records. If Paterno signs on, it’s expected that he might recruit Mike Bone, president of Chrysalis Records, to help oversee the label.

“Peter has a broad knowledge of the business,” said Sykes. “When I was an agent at CAA, I had lots of dealings with him. He’s not only aggressive, but he’s known as an attorney who took an interest in every aspect of his clients’ careers.”

Said Joe Smith: “Peter really knows the marketplace, but whether he can start a label from scratch is a tough question. The business is a lot different than it was 10 years ago, when there were 30 labels out there. Now you’ve got five major companies who basically control the business. So it’s going to be even tougher for a new player to get a foothold.”