A Hollywood Ending Near for Milgrim?

The on-again, off-again rumors of former Capitol Records President Hale Milgrim taking over Hollywood Records are heating up once more.

Sources say Milgrim has been invited to a second meeting with Walt Disney Co. Chairman Michael D. Eisner, who’s personally scouting for a new chief for the troubled label.

While Eisner and Milgrim declined to comment, industry sources give the Milgrim rumor some credence, since his name is one of the few that’s repeatedly surfaced.

“Disney wants someone creative, because they know that they have to be seen by the artists as a favorable place to come,” said one source. “And that would start with Hale.”

Milgrim lost his job at Capitol in May during a major management shake-up. Three months later, Disney began its search for a new Hollywood Records chief after announcing that Peter T. Paterno was leaving after nearly four years of failed efforts to make a go of the label.

In the course of the search, Eisner has solicited advice from the top people in the record business, including Warner Bros. Records Chairman Mo Ostin and former Capitol/EMI Chairman Joe Smith.

Industry sources expect a decision before Paterno’s contract formally expires in November. In addition to Milgrim, the candidates mentioned most often are former Virgin Records executives Jeff Ayeroff and Jordan Harris. But they reportedly aren’t interested. Another possible successor, Hollywood general manager Brad Hunt, left the label this week.

If Milgrim gets the nod, some speculate that former Capitol executive vice president Art Jaeger and current Capitol executive Tim Devine may also be Hollywood-bound. Industry sources, however, warn that it’s too soon to confirm the selection of Milgrim--one describes his discussions with Eisner as “vague”--much less a Capitol Gang management team.

Milgrim’s reputation has gotten a boost with the recent success of Blind Melon, a group that joined Capitol when he was president but became a hit after he left. He’s also one of the industry’s most popular executives, but friends say he is ambivalent about his future.

Milgrim can afford to live off his reported $5-million contract buyout for the near term, and has spent much of his time recently traveling with his wife and family, they say. At the same time, they concede that he may be intrigued by the challenge of making a go of Hollywood Records, since rescuing Hollywood would be tantamount to a music industry miracle.

In its brief history, the label has come under unremitting criticism, even by the harsh standards of the record business. Many executives and musicians say the label is not only handicapped by bad management, but by its rejection of raw urban music. “I don’t know if there are any Disney-style guys in the record industry,” said one.

Eisner started the label in 1989 as a cost-saving alternative to acquiring an existing company. Critics say he erred in hiring Paterno, a music lawyer with no record company experience, and in signing a lopsided distribution deal with Time Warner’s Elektra label.

Under Paterno, Hollywood Records’ one major success has been the rock band Queen. The band regained popularity after the AIDS death of lead singer Freddie Mercury and the release of “Wayne’s World,” which built a major scene around the Queen song “Bohemian Rhapsody.”

Hollywood also hired a couple of well-regarded artist and repertoire executives recently--Bob Pfeifer and Nick Terzo--although there’s no word on whether they’ll remain with a new regime.

On the financial side, Jeffrey Logsdon, an analyst with Seidler Cos. in Los Angeles, estimates that Hollywood is losing $25 million a year. But Logsdon says the investment in the company could still pay off if Eisner improves management.

“If you went out and bought a sizable music enterprise with a catalogue, publishing and distribution, you would spend about $1 billion,” said Logsdon. “So when you look at the capital investment scheme . . . there’s a long way to go before they get to a point where it would have made more sense to buy a business.”

Yet good help doesn’t come cheap. Some colleagues say Eisner will have trouble finding a top executive because he’s unwilling to offer an equity stake in Hollywood, like the 20% interest Interscope Records awarded to producer Jimmy Iovine for managing that successful label.

Executives say Eisner will also have to be patient, no matter whom he brings in.

“This is really a case of starting over,” said one. “And it will take four to seven years to do it right.”

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And Then There Were Two: Now that Paramount Communications is pledged to Viacom International, at least until a better offer comes along, are Metro-Goldwyn-Mayer and Orion Pictures more alluring acquisition targets? Not really.

Analysts and other industry experts say the two mini-studios probably won’t attract any serious attention from buyers until they get their houses in order.

“Both of those companies need to develop an operating profile before they become premier assets,” said analyst Jeffrey Logsdon. “It appears that (MGM owner) Credit Lyonnais, with the help of Creative Artists Agency, has put a team together that can help create a renewed sense of value at MGM.

“In the case of Orion, they’re probably more in a financing mode that will allow them to bring in a partner at subsidiary level,” he added.