Mariah Carey? She represents ”the safe pop music (that) is…the surest road to economic ruin.” Vanilla Ice? A ”fluke (who has) little to do with long-term label success.” Whitney Houston and Michael Bolton? ”They are part of the business with which I’m just not comfortable.” Natalie Cole? ”When Elektra signed (her), I thought they were crazy.” Bonnie Raitt and Heart? ”You couldn’t have found two bigger losers in the record industry.”
Paterno explains his approach to signing acts–Hollywood has 30–by saying he looks for artists with “good songs and an attitude.” He goes on to say: “The central concept is that I try to avoid blandness at all costs.” Paterno writes that Hollywood also looks to sign acts in the $100,000 range and that he is devoted to making “cheap” records.
Disney started Hollywood Records in 1989 in an effort to capture some of the pop music market. The entertainment industry has since fallen into one of its deepest downturns in years. Once a darling of Wall Street, Disney reported a 23% drop in profits for fiscal 1991.
Hollywood has been one of the drains on corporate earnings. In the memo, Paterno reveals that Hollywood could lose $33 million in 1992 under a worst-case scenario.
The memo indicates that Wells has set a ceiling of $20 million on losses; it is unclear whether the ceiling applies to 1991 or 1992. Paterno writes that he has no objection to a “financial box, as long as the financial box is realistic.”
Jeffrey Logsdon, an entertainment analyst with Seidler Amdec Securities in Los Angeles, said Disney has to be patient if it expects Hollywood Records to succeed, since the company has decided against engaging in bidding wars for established superstars.
“In music, it’s either free agents or it’s the farm system, and Disney clearly is taking the farm system route,” Logsdon said. “If they had any illusions that they would be cranking in big profits at the end of the year, then somebody didn’t do the correct analysis.”