Apple’s business problems surface and become public knowledge

December 1968 - January 1969

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Has Apple got rotten ?

In December 1968, music newspaper Melody Maker published a somehow bleak picture of Apple, including some comments from its press officer Derek Taylor:

HAS APPLE GONE SOUR? That’s a question people are starting to ask as directors quit, and the film division virtually closes down. There are also rumours circulating of lack of communication and of the right hand not knowing what the left hand is doing. But there’s more to it than that, as the MM found out when it put some hard questions to Apple’s press and publicity man, former journalist Derek Taylor.

[…] Where they failed – and their chief communicator Derek Taylor freely admitted this week – was in too much diversification of intent and not enough appreciation of what their sort of Happyland would entail in sheer physical effort.

A sort of law of diminishing returns working hand-in-hand with a sister law of increasing commitment has forced them to retrench into what is now virtually a record and publishing company, with a few liberal touches where, if money helps a cause, money is provided, although Apple is not, and never has been, the easy touch that a lot of people thought it was. […]

We are now more or less a record company. Yes, that’s right“, said Derek Taylor this week. “We started off with grandiose ideas but it’s difficult to be grandiose in a glum society like the one which we have here. […] What have we done? We’ve closed the shop, shut down the film department to all intents and purposes, lost a few employees, said goodbye to a couple of directors, produced the biggest Beatles single ever and a hit with Mary [Hopkin] and the album, helped a few people and failed to help a few others. We haven’t succeeded in everything; we haven’t failed in everything either.

From Melody Maker – December 7, 1968
From Melody Maker – December 7, 1968

Apple’s mismanagement

The Melody Maker article was focused on the sense of purpose of Apple. But in the meantime, it also became obvious for Apple’s management team and therefore for The Beatles that the company was bleeding money and the situation was becoming unsustainable. Alistair Taylor, Apple’s general manager, was the one who had to explain the situation to the Beatles:

The meeting Alistair had with the Beatles and Neil Aspinall was extremely difficult. Just for once they listened to the man with the shiny shoes and his advice. He showed them that Apple was losing in the region of £50,000 week in and week out. Projected over a full calendar year the losses would amount to £2.6 million. (Allowing for inflation that equates to around £30 million today.) Yet executives were buying expensive pieces of art for their offices. Equipment of all kinds was ordered and disappearing within hours including major items of furniture and hand made carpets. Staff were given ridiculous salaries. Apple was a magnet for every freeloader and petty thief in London and, indeed, the world.

If you allow things to carry on the way they are you will lose all of your money within twelve months,” he told the Beatles.

Don’t be a drag Al,” was Lennon’s immediate response.

Apple is far too big and complicated a business to be run by Neil and me,” Alistair replied. “We are not up to the job and I include myself in that statement. This company needs a figurehead, a proven businessman. You need someone like Lors Beeching. Otherwise, we’ll all be on the scrap head.” With that, he closed his briefcase and walked towards the door. Everyone was very quiet.

It’s your decision,” he told them as he left the office.

From “Hello Goodbye, the story of Mr. Fixit” by George Bunby

I was getting very worried by now, and I called the boys in, sat them down, and said, ‘Look, this can’t go on!’ Neil [Aspinall] was with us and he was more on their side than mine. I said, ‘Something has got to be done. We cannot go on like this. Look at us. We’re a multi-million-pound company, and you’ve just got us five guys running this company. I can’t speak for everyone, but, for me, it’s beyond me to do it like it should be done. I think we need a top businessman in here to run it. Somebody to control the company.’ John then began to realise that money was flying out.

Alistair Taylor – Apple general manager – From “The Beatles: Off the Record” by Keith Badman

For the people who were there, it was too much to run. I’m not an administrator, I’m a terrible administrator, you know. Certain things I’m good at, and some things I’m not, of course. The Beatles weren’t skilled in administrations, why should they be? So, no one was really running the place. It was running itself, but places can’t run themselves. They have to be run, so someone had to come in and do it. This someone turned out to be Allen Klein.

Derek Taylor – Apple press officer – From “The Beatles: Off the Record” by Keith Badman

We would just spend money, but we didn’t know where we were spending it from or if we had paid taxes on it. We were really in a bad shape as far as that was concerned. Really, none of us could be bothered. We just felt as though we were rich because, really, we were rich, by how many records we had sold and what we did. But it wasn’t really the case. It was just so untogether, you know, the business side of it.

George Harrison – From “The Beatles: Off the Record” by Keith Badman

People were robbing us and living on us … Eighteen- or twenty-thousand pounds a week was rolling out of Apple and nobody was doing anything about it. All our buddies that had worked for us for fifty years, were all just living and drinking and eating like fuckin’ Rome! And I suddenly realised it … We’re losing money at such a rate that we would have been broke, really broke. We didn’t have anything in the bank really, none of us did. Paul and I could have probably floated, but we were sinking fast. It was just hell, and it had to stop!

John Lennon – From “The Beatles: Off the Record” by Keith Badman

There were huge expenses bills, catering, drinks, free cars and houses for people. Every Beatle had his own personal assistant, all of them overpaid.

Tony Bramwell – Quoted in Classic Rock, May 2020

Everybody connected with us is millionaires except for The Beatles. They used to tell Paul and I we were millionaires, and we never have been… George and Ringo are practically penniless.

John Lennon – Quoted in Classic Rock, May 2020

John Lennon goes public

On January 13, 1969, an interview of John Lennon by Ray Coleman was published in the Disc & Music Echo, making the business problems public for the first time:

Are you happy with the way that Apple is shaping?

No, not really. I think it’s a bit messy and it wants tightening up. We haven’t got half the money people think we have. We have to live on, but we can’t let Apple go on like it is. We started off with loads of ideas of what we wanted to do, you know, an umbrella of different activities. But, like one or two Beatles things, it didn’t work out because we weren’t quick enough to realise that we needed a business brain to run the whole thing. You can’t offer facilities to poets and charities and film plans unless you have money coming in. It’s been pie-in-the-sky from the start. Apple’s losing money every week because it needs closely running by a big businessman. We did it all wrong, you know, Paul and me running to New York, saying we’ll do this and encourage this and that. It’s got to be a business first. We realise that now. It needs a broom and a lot of people there will have to go. It needs streamlining. It doesn’t need to make vast profits, but if it carries on like this, all of us will be broke in the next six months.

Then, you miss Brian Epstein’s guidance?

Sure we miss him. His death was a loss, and that’s probably what’s the matter with Apple or The Beatles at the moment. Brian’s death left us on our own. He headed the business, and we find it hard to. […]

We have enough to live on, but we can’t let Apple go on like this. We started off with loads of ideas of what we wanted to do… but like one or two Beatles things, it didn’t work out because we aren’t practical, and we weren’t quick enough to realize we needed a businessman’s brain to run the whole thing.

John Lennon – Interview with Disc & Music Echo editor, Ray Coleman, January 13, 1969
From Disc & Music Echo editor, January 13, 1969
From Disc & Music Echo editor, January 13, 1969

Even if John was lucid about their state of affairs, the other Beatles felt they needed to do some damage control, following this interview:

When John said we’d be broke in six months, it was just a figure of speech indicating that we’d have to wake our ideas up.

Paul McCartney – From “The Beatles: Off the Record” by Keith Badman

Beatles John Lennon and George Harrison did NOT have a punch-up and Apple – their business company – is NOT on any financial rocks. The denials came last night from The Beatles themselves. It all began when a pop weekly reported Lennon as saying that Apple was ‘losing money every week’, and needed tightening up. Then came the rumour that Lennon and Harrison had come to blows. But, last night, after a five-hour meeting between the four Beatles and their business associates at Apple’s Savile Row headquarters, explanations came fast. George Harrison said, ‘Apple has plenty of money – we all have. When John said we were losing money, he was talking about giving too much away to charities. We have been too generous and that’s got to stop. The so-called punch-up between John and myself? There’s no truth in it. We are still good friends.’ John Lennon, who left with Yoko Ono, said, ‘Any rumours about Apple folding were nonsense.’ But he added, ‘There will be changes and it’s all going to be very exciting.’ Ringo Starr called the story of a punch-up, ‘A load of old rubbish!’ He said, ‘I was there when it was supposed to have taken place. It’s quite untrue.’ The fourth Beatle, Paul McCartney, said of the long meeting, ‘There was nothing sinister about tonight. It was simply a business discussion.’

Daily Express – January 16, 1969

We’re extremely vulnerable and we know it. We have made a lot of mistakes because we were too ambitious at first. We tried to do too much at once and the result was chaos. We should never have tried to beat Marks & Spencer with the boutique idea and the other divisions like feature films and electronics were too premature. Now, we have put these companies on ice and are concentrating our activities on records and music publishing. We are all four heavily involved in Apple, although John and I have more money in it because we’re richer … We used to be too generous, but now, if a group comes along and asks us to buy them amplifiers, we’ll tell them to get themselves together as a group first and then come and see us, otherwise it becomes charity, and people resent charity.

Paul McCartney – May 1969 – From Badman, Keith. The Beatles: Off the Record .

Searching for a new manager for Apple

The Beatles, at the initiative of Paul McCartney, then started to look for a new manager for Apple. But quite quickly, after having met him in October 1968, Paul was convinced that Lee Eastman, father of Linda Eastman and his future father-in-law, should be put in control of The Beatles’ financial affairs. Lee Eastman indeed had the relevant experience, being a New York-based attorney with some experience with music copyrights.

The other Beatles were not really comfortable with the idea that Paul’s future father-in-law would run Apple, but they agreed to have Lee Eastman and his son John as business advisors for a short while.

There was a point when Paul, with the support of the others, went looking for a major figure to run Apple, on the basis of they were so big and powerful that Neil and I were not qualified to do it. Paul felt that the Beatles needed the biggest and the best to run their corporation. They interviewed English tycoons like Cecil King and Dr. Beeching, but these people were not interested. Not only that, they knew nothing about the music business.

Peter Brown – From Granados, Stefan. Those Were The Days 2.0 (pp. 134-135). Cherry Red Books. Kindle Edition.

Paul had been agitating for some time for a new manager for Apple. He was fed up with the way that the company was being run and he asked his future father-in-law, Lee, to recommend someone to put the house in order. Lee, of course, recommended his son, John.

Nat Weiss – Beatles attorney – From “The Beatles: Off the Record” by Keith Badman

I put the Eastmans up. I thought they would be fair. For one thing, they are lawyers. They don’t take per centages, they take a fee. So, they manage you, and, at the end of the year, they put in a bill. And, if you don’t like them, you don’t pay the bill. Well, you pay the bill, but you sack them for the next year.

Paul McCartney – From “The Beatles: Off the Record” by Keith Badman

John Eastman gave me the impression of being an inexperienced, somewhat excitable and easily confused young man. We all knew of Paul’s friendship with the family … I was against the idea of having, as manager, anyone in such a close relationship with any particular Beatle, but, apart from that, they did not strike us as having the right experience or knowledge for the job which had to be done.

John Lennon – From “The Beatles: Off the Record” by Keith Badman

Despite the other Beatles’ reluctance, they all signed a document (maybe during their January 12 meeting) giving the Eastman & Eastman law firm rights to negotiate contracts on the Beatles’ behalf.

John Eastman would use those rights to negotiate the acquisition of Brian Epstein’s former company NEMS Enterprises for £1 million.

But all those ideas – John and Lee Eastman as Beatles business manager, buying NEMS – would be derailed with the arrival of American businessman Allen Klein.

Out of the clear blue, John Eastman was already there and the old man, Lee, arrived soon after. You can be sure they wanted to take over as managers. I baited Lee Eastman a bit. He blew his cool, and started screaming and cursing at me. That settled it. They knew what he was like then, all except Paul.

Allen Klein – From “The Beatles: Off the Record” by Keith Badman
From Jan. 12: A family outing (Pt. 1) | They May Be Parted

Paul decides to buy Northern Songs shares

Around that time, and likely the discussions with Lee Eastman and John Eastman, Paul McCartney became interested in the music publishing business and purchases several thousand shares in Northern Songs without telling the other Beatles. It would be an unpleasant surprise for John Lennon during the fight for Northern Songs in April 1969.

It was the first time that any of us had gone behind anyone else’s back. When I asked Paul why he was buying these shares, he said, ‘I had some beanies and I wanted more!’

John Lennon – From “The Beatles: Off the Record” by Keith Badman

I once bought some Northern Songs shares. John and I once said if we ever wanted to invest in anything, the best thing to invest in were ourselves. Lennon-McCartney, that’s the best thing to invest in. If we get a chance, we’d buy some shares. One day, I rang up Peter Brown and asked him to buy some shares. It was like two hundred or something. It wasn’t a major holding or anything. In the end, the big game was on and we were in big boardrooms with Mr Klein and it was deadly serious and suddenly, it came up. ‘Oh, Paul bought some shares!’ And I said, ‘Well, yeah, it was all right, wasn’t it?’ And they accused me of trying to corner a market, or something, and it went down like that. John definitely thought that. If I had wanted to corner a market, I would have bought more bloody shares than two hundred!

Paul McCartney – From “The Beatles: Off the Record” by Keith Badman

Last updated on January 2, 2022

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