Did you ever figure out what was going wrong? I'm encountering an issue where Convert Labels To Annotations fails at the "giving features to label engine" stage, though I am trying to add annotations to an existing annotation feature class, rather than generating a new one.
Thanks in advance!
I resolved my issue, which may be the same as yours! It appears that there's a maximum of 1000 conversions you can do before needing to go through your data and append Annotation Classes by changing all Symbol ID values to 0. If you were working with a very large DDP set, this may have caused your issue.
Further detail at: https://community.esri.com/thread/210216
I know it's been 6 years and the likelihood of you needing this info is basically nonexistent, but for anyone else who has this issue and stumbles on this post, I hope it helps.