Hollywood Records turns up volume amid downturn.

After years of making little impact in a crowded marketplace, Walt Disney Co.'s Hollywood Records appears to be hitting its stride with a number one album by teen actress Hilary Duff and a slew of hot new acts with new releases.

"They've had some top albums before with the "Tarzan" movie soundtrack in 2000, but not like this Hilary Duff album," said Geoff Mayfield, director of charts and senior analyst for Billboard Magazine.

Duffs "Metamorphosis," was ranked second last week after spending its first two weeks atop the Billboard 200 of the top albums ranked by sales in the country.

Duff, who starred for three seasons on the Disney Channel's teen comedy "Lizzie McGuire," now has a movie deal and recording contract with Hollywood Records, also owned by Disney.

Hollywood is the distribution arm for the music group and its other labels.

Bob Cavallo, chairman of Buena Vista Music Group, which oversees Hollywood Records, isn't surprised by the 16-year-old actress/singer's success.

She has managed to attract many of the same fans that made stars out of former early '90s-era Disney Mouseketeers Britney Spears and Christina Aguilera, Cavallo said.

With more than 400,000 copies sold in its first three weeks of release, Duff's album is giving Hollywood Records a needed shot in the arm after suffering through a rough last couple of years along with the rest of the recording industry.

Like other record labels, the company sought to cut costs and streamline its operation to operate in a down economy. Hollywood laid off about a dozen people last year and cut back its album output to further cut costs.

According to the Recording Industry Association of America, the number of CDs sold overall has been declining over the last three years. In 2002, the number of CDs sold dropped by 8.9 percent over the previous year, or 14.8 percent since 2000 when a record 942.5 million CDs were sold. The industry trade group blames the sales drop on illegal downloading and pirating of copyrighted discs.

"They've really been a small part of Disney for years and they haven't gotten a lot of attention from corporate," said Jeffrey Thomison, an analyst with Hilliard Lyons.

"There's a lot on Disney's plate with priorities being the parks and resorts and the entertainment studio so it's great to see what the music side has done."

Creating synergy

Thomison credited Duff's hit album to Disney's ability to create synergy among its various divisions.

"It's really developing great synergy between their cable, film and music segments," he said.

But Cavallo said years of hard work and good music is paying off for the label.

"Hollywood Records has risen to new heights and overcome some challenges and Lyric Street (Disney's country music label) has matured," he said.

Duff's hit album comes after the conclusion last year of her hit TV show and the success of the spinoff film "The Lizzie McGuire Movie," which proved Duff could migrate her teenage audience from television into movie houses.

"All things being equal, if this album were done by anybody else, it would not be a hit, though it would still be a good album," Billboard's Mayfield said.

The record's sales show Duff's growing popularity with both young children and teens. About 70 percent of those who bought "Metamorphosis" were between 13 and 22 while about 70 percent of those who bought the soundtrack for "The Lizzie McGuire Movie" were younger than 13, the company said.

"Metamorphosis'" success shows that despite little support from Disney's corporate structure. Hollywood Records has managed to develop into a more important player in the music industry.

"They're still a small label, but they're making a lot of good moves and gaining some traction," Mayfield said.

So far, the company has 10 albums in the Billboard 200 album charts--something it has never had before.

It was just 10 years ago that Disney created its Hollywood Records label to develop new artists and issue soundtrack albums of Disney films. The label became one of several that were developed and run separately by Disney.

But after Cavallo became chairman of Walt Disney Music Group in 1998, which included Hollywood Records, he brought together its other labels, Mammoth Records, Disney Records, Lyric Street Records and Buena Vista Records into the then newly-named Buena Vista Music Group.

"It makes more sense to have this pop label here and then this children's label there and those others and bring them together," Mayfield said.

New artists

The label went on to sign a number of mostly new artists like Josh Kelley, Nydia Rojas and alternative rock band Diffuser, along with 1980s Latin rockers Los Lobos, and former Queen guitarist Brian May. But none has been the breakout artist the label has long been seeking until Duff.

But even as Duffs "Metamorphosis" continues to do well, other artists are also making their mark. Rascal Flatts, a country and western band signed in 2001 has managed to place five consecutive top 10 singles in Billboard's Hot Country Singles chart--a feat last achieved by the Dixie Chicks.

At the same time, Hollywood was getting more good news from Josh Kelley's debut album "For the Ride Home," which moved up to fifth last week after 14 weeks on the Billboard's Top Heatseekers chart for new and developing artists.

Other artists are also showing good numbers for the company. Rascal Flatts' debut album "Rascal Flatts," and "Queen's Greatest Hits," are also selling briskly, ranked 18th and 19th, respectively in Billboard's Top Pop Catalog chart.

"They've also continued to do well with their soundtrack albums for other film studios," Mayfield said.

Last week, Hollywood had three soundtrack albums, "Freaky Friday," "The Lizzie McGuire Movie," and "The Cheetah Girls," in that chart's top 10 list.