Disney Finds New Way to Label Itself

Hey, Jay Faires!

The bidding for your hot little music label, Mammoth Records, just jumped to $25 million. Now what are you going to do?

Who would have imagined that Walt Disney Co. would have emerged the winner from last week’s frantic bidding war for Faires’ tiny Carrboro, N.C.-based label, home to such budding alternative rock acts as the Squirrel Nut Zippers, the Backsliders, Juliana Hatfield and Victoria Williams. The 32-year-old Faires closed his pact with Disney early Monday morning after rejecting offers from PolyGram, A&M; Records and Bertelsmann Music Group.

Mammoth’s $25-million price tag buys Disney a quick dose of credibility in the rock market, providing the company with its first hit by a breaking act: the Squirrel Zippers’ “Hot” album, which currently ranks No. 56 on the nation’s pop chart.

More important, the Mammoth acquisition signals a major shift in Disney’s strategy in the music business.

It indicates that the Burbank-based entertainment giant is ready to throw in the towel on its failed Hollywood Records division and abandon its dream of building a rock music powerhouse from scratch. Disney chief Michael Eisner is said to be fed up with Hollywood Records’ lack of progress and may soon turn it into a soundtrack division.

You can also take Disney’s name off the list of suitors lining up to buy EMI Music. Although Disney has had its eye on the British record conglomerate for more than a year, Eisner has apparently decided to spend the company’s resources elsewhere.

Instead, Disney film chief Joe Roth, who now oversees the firm’s record division, has been given a mandate to expand the corporation’s presence in the music business--and hundreds of millions of dollars to make it happen.

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The plan now is for Disney to put together a collection of five labels, each concentrating on a different music genre: rock, country, soundtracks, pop and urban (minus gangsta rap). Each label will be run autonomously by an executive skilled in that field--much the way Disney runs its Miramax film division, where creative decisions are made by company founders Bob and Harvey Weinstein.

Roth sees Mammoth as the first in a series of acquisitions that he hopes will put Disney on the map as a major player in music.

“Our investment in Jay Faires is the beginning of a new musical vision for Disney,” Roth said. “It’s no secret that Hollywood Records has been a great disappoint- ment. . . . For a company that has done extremely well in every other medium, it’s been very frustrating for us not to do well in music.”

Roth noted that Disney’s blueprint isn’t unique. The concept is modeled after the most successful record conglomerate in the record business: Warner Music Group. The late Warner chief Steve Ross united three distinct labels (Warner Bros., Elektra and Atlantic) under one umbrella, but allowed them to be run autonomously by such aggressive competitors as Mo Ostin, Jac Holzman and Ahmet Ertegun.

Although Disney has sunk more than $150 million into Hollywood Records since its 1989 launch, the company has yet to score a major hit in the rock market. Along the way, Hollywood’s management passed up opportunities to sign such acts as Nirvana, the Smashing Pumpkins and Dr. Dre, each of which went on to become commercial blockbusters for other companies. Six months after Disney decided to buy out its distribution pact with artist manager Rob Kahane, he resurfaced at Interscope Records, where his British act Bush scored a hit album that sold millions.

Disney hasn’t had much luck recruiting executives, either. The company has already been through two unsuccessful regimes, and industry veterans from Ostin to Tom Whalley have turned down the gig, despite multimillion-dollar contract offers with promises of creative control.

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Competitors and employees at Hollywood Records believe the label’s biggest obstacle has been Disney itself--or at least the company’s image as a bastion for wholesome family entertainment.

Last month, the company shot itself in the foot again when it released and then yanked from retail stores 100,000 copies of an obscenity-laced album by an obscure Detroit rap duo named the Insane Clown Posse. The incident did nothing to change Disney’s reputation in the music world as a laughingstock.

Although many in the creative community are skeptical about whether Mammoth will be allowed to operate independently, Faires believes he will continue calling the shots under a five-year pact.

“I am not worried one bit about” corporate intrusion, said Faires, whose company two years ago passed on a chance to sign the Insane Clown Posse. “I think I can rock on this thing and blow it through the . . . roof. I am psyched to be working with Joe and Michael.”

Mammoth, launched in Faires’ apartment nine years ago, has a 20-artist roster that generated an estimated $15 million in gross billings in 1996. Time Warner Inc.’s Atlantic Group severed a five-year joint venture with Mammoth earlier this year because, sources say, the company was unprofitable--a contention Faires denies.

Both Faires and Roth said they believe Mammoth will grow into a much larger operation with Disney’s financial muscle behind it. In the future, Mammoth recordings will be distributed through PolyGram, which signed an international distribution pact with Disney in 1995.

Disney’s decision to revamp its record sector followed a series of meetings over the last four months among Roth and some of the industry’s top artists, executives, managers, agents and lawyers. While courting Mammoth over the last few weeks, Roth has continued to meet with potential candidates--including former Motown chief Jeryl Busby--to run Disney’s urban and pop divisions.

The 49-year-old Roth, whose musical tastes run from Elvis Presley to Coolio, will oversee the initial stages of Disney’s musical restructuring until he can find an executive to run the entire group.

“The approach we intend to take from this point out is to grow a collection of independently operated musical assets run by aggressive young individuals,” Roth said. “We hope to wake up five years from now with a group of mature labels . . . and some good news in a business in which we haven’t had much but bad news.”