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.
Worried that he would be too dependent on Mickey, 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).
Joseph Barbera tells in his autobiography "My Life in 'toons: From Flatbush to Bedrock in Under a Century", he saw "The Skeleton Dance" at the third balcony of the grand Roxy Theater in New York: "I saw it about seventy miles from the screen, but the impact on me was tremendous nevertheless. I saw these skeletons dancing in a row and in unison, and I asked myself: How do you *do* that? How do you make that happen?"