Worried that he would be too dependent on Mickey Mouse, Walt Disney wanted to diversify. Carl W. Stalling came up with the idea of producing “musical novelties” (which would later become “Silly Symphonies”). He even came up with the idea of the dancing skeletons for the first of the series (as a child he had seen an ad in “The American Boy” magazine for a dancing skeleton and the image stuck with him).
At the time, Walt Disney distributed his films through a company run by Pat Powers. But Powers couldn’t sell it to distributors (who found the dancing skeletons odd and even gruesome). Undeterred, Disney was able to have the film screened at the Carthay Circle Theater in Los Angeles, where it was a rousing success.
“The Skeleton Dance” became the first cartoon that the Cartay Circle Theater in Los Angeles ever showed.
(Source: imdb.com)