In an interview with Yahoo, John Musker and his directing partner, Ron Clements, presented their idea to do Hans Christian Anderson’s The Little Mermaid at a Disney “Gong Show” where everybody presented ideas to then Disney exec’s Michael Eisner and Jeffrey Katzenberg.
However, once they read the treatment that Ron Clements had written for the film, they realized it was the perfect film for Disney to do, and changed their mind.
Apparently, the idea was originally “gonged” because Disney was already producing the made-for-TV sequel to Splash, Splash, Too, and they didn’t want to do another mermaid movie.