While Disney has in the past been very militant about the use of the IP, I find this hard to believe.
Did you actually experience this or did you hear about it from a friend who knew somebody whose second cousin's ex-wife's barber's third cousin twice removed told them about it?
I work with a large singing group (150 member chorale) who produces both CDs and DVDs of their concerts. The licensing of the music produced (so long as we have the permissions of the professional musicians we hired as accompaniasts [we usually include the performance permission in their contracts and pay them extra for signing off on reproduction rights - getting permissions after-the-fact from 105 symphony musicians ain't easy!]) is handled either by BMI or ASCAP and the licensing is seldom more than $1 per CD or DVD produced. If we turn out 1000 copies, then we usually pay a license fee of between $500 and $1000 for all of the songs on the disk. We have performed Disney songs and the licensing was right in line with all other works. The Disney department could have gone directly to BMI (for this purpose, I think) and done the usual licensing that anyone else could do.
Some things are not licensable... songs from currently running Broadway musicals or those that may have been licensed exclusively to a specific artist are generally not available to anyone except the current licensee. Some, like the Beatles catalogue is retained privately.
Vermont LT, ASCAP and BMI act as a clearing houses for payments between consumers and producers of music, including composers, performers, and publishers. The only reason I can think of that prevented them from selling you a license for the music you wanted to use on your CD was that they did not have an agreement with those who produced or performed the recordings you wanted to use. Since you were going to use the actual performance recordings of some artists, the fee per CD would probably have been a bit more than the amount I mention above, but not much... Maybe $2 per CD produced.
That being said, I think there should be a limit before you are required to pay the fee... For your purposes, the use of the music as secondary to a video of the girl's Basketball performance, for under 25 copies, for distribution within a limited membership group, I think the the law should permit blanket use for the initial copies under the fair use doctrine.
Check your FR Mail...
Actually, they indicated to me that they no longer handled this type of synchornization license. They directed me to the different labels. $2 a CD would have been great with me and it would have made me feel like I was doing the right thing.
This was about six months ago, so who knows--