Meeting to discuss the Capitol / EMI agreement

In January 1967, Brian Epstein negotiated a new nine-year recording contract between The Beatles and EMI/Capitol. The agreement significantly improved the band’s position compared to the previous contract signed in 1962: it increased their royalty rate and granted them greater artistic control. Notably, it removed Capitol Records’ longstanding right to alter album artwork and track listings for the American market. In return, The Beatles were bound to EMI until 1976.

Following Epstein’s death in August 1967, and after a period of self-management, Allen Klein was officially appointed The Beatles’ business manager in May 1969. From the outset, Klein sought to renegotiate the group’s royalty terms. Since the 1967 deal, The Beatles had released a string of commercially successful works, including numerous hit singles, the landmark “Sgt. Pepper’s Lonely Hearts Club Band,” the “Magical Mystery Tour” double EP, the double album “The Beatles” (commonly known as the White Album), and the “Yellow Submarine” soundtrack.

The commercial performance of the White Album, released in November 1968, gave Klein considerable leverage. The album alone boosted EMI’s share of the UK record market from 28% to 40%, with retail sales exceeding £900,000. The forthcoming release of “Abbey Road” would only strengthen his negotiating position.

Under the existing contract, The Beatles earned 17.5% of the US wholesale price of their records—a substantial amount at the time. Klein successfully argued for an increase to 25%, threatening that the band would cease recording if the label refused. EMI and Capitol agreed.

In exchange, The Beatles committed to deliver two new albums per year — either as a group or as solo artists — until 1976. New albums would earn 56-58 cents per unit until 1972, and 72 cents thereafter.

Klein also secured for Apple Corps the right to manufacture and sell Beatles records in the United States. While EMI retained ownership of the recordings, Capitol would manufacture the releases on Apple’s behalf. Apple would then profit from the difference between manufacturing and retail prices.

For the first time, The Beatles had control over how their music was manufactured and distributed. By 1971, their entire back catalogue was reissued on the Apple label. The deal not only ensured improved personal incomes for the band members but also guaranteed Apple a steady revenue stream through to at least 1976.

The revised contract was signed on September 20, 1969, by Paul McCartney — despite his deep mistrust of Allen Klein — along with John Lennon and Ringo Starr. George Harrison was absent but added his signature a few days later.

According to Paul’s diary for this day, September 17, a meeting was held to discuss the Capitol / EMI agreement.

Photographs believed to have been taken on this day — captured by Linda McCartney and Maureen Starkey — suggest that both women, along with Yoko Ono, were also present at the meeting.

Are the Beatles worthy of a renegotiated royalty agreement with EMI?

Absolutely — they are an institution. In the first place, they deserve it. It was made clear to Sir Joseph Lockwood by the Beatles and myself that the boys thought the agreement was supposed to be 70 sides or nine years whichever was the sooner. The 70 sides have now been recorded. Am I going to start a law suit? Of course, I’m not. We have things to give. There are no club rights; no repackaging rights. These are important things. We could guarantee them a certain amount of product.

I am really not unreasonable. I would never ask someone for something they could not give. EMI would want to put out records. Now that we have got the Nems affair out of the way, I think EMI is interested in obtaining additional considerations for themselves. It is not something under duress. They want to do what is best for the Beatles.

Allen Klein – Interview with Record Retailer, July 1969

Appointing Klein was an awful thing for them to do – he was a terrible problem. He wanted to cancel the 1967 contract and I told him he couldn’t. Then he said he wanted to change it and I told him we’d be happy to change parts of it.

He wouldn’t agree to anything so I told him to get out. After about an hour he rang to apologise and then later, in some magazine interview, he said he thought I was wonderful but that everybody else at EMI was a shit!

Sir Joseph Lockwood – Chairman of EMI – From “Northern Songs: The True Story of the Beatles Song Publishing Empire” by Brian Southall and Rupert Perry, 2006

The 1967 agreement took a year to negotiate. They had a year to consider it. They knew their rights. They got a large sum of money and the deal was explained to them in great detail.

Sir Joseph Lockwood – Chairman of EMI – Interview with Record Retailer, August 1969

Klein was the most difficult man I ever had to deal with. You could never get him to sign anything, he was a bit crafty yet there was something about him that made it difficult to hate him.

Leonard Wood – EMI managing director – From “Northern Songs: The True Story of the Beatles Song Publishing Empire” by Brian Southall and Rupert Perry, 2006

Even McCartney congratulated me over the new record deal.

Allen Klein – From “The Beatles: Off the Record” by Keith Badman, 2008

Though John Eastman had written to Capitol saying Klein didn’t speak for McCartney and suggesting there should be a separate contract for each of the Beatles, everyone was pleased with the terms Klein negotiated and all four Beatles signed. “If you’re screwing us,” the skeptical McCartney quipped, “I don’t see how.”

From “Allen Klein: The Man Who Bailed Out the Beatles, Made the Stones, and Transformed Rock & Roll” by Fred Goodman, 2015

I did a great deal with EMI and Capitol. They knew they couldn’t stop an artist recording. So, up went the royalty rates. We account for over fifty per cent of Capitol Record’s business. They’re just our distributors. I did Capitol a great favour. I delivered them product. These boys want to work, but you have to motivate them. They won’t work while a record company is screwing them. But, when somebody gets rid of the bullshit, and they’re getting a fair deal, they’ll work.

Allen Klein – From “The Beatles: Off the Record” by Keith Badman, 2008

Allen Klein wanted me out because I would tell the truth about him. […] Brian Epstein did a seven-year contract, which, I think, showed his insecurity at the time. It was 17 percent of the wholesale price. It should have been somewhere around 20 to 22 percent. When Allen renegotiated, it turned out that in actual figures, it was no more than 1 or 2 percent higher. And Klein took more than that as his part. He was supposed to only take 10 percent of the increase. He always said, “I am only going to take a percentage on the things I get for you.” But, of course, when he did the contracts, he was taking 10 percent of everything. Of everything. So, in other words, whatever he did renegotiate, they ended up with less than they had before. It was all based on a lie.

Ron Kass – ex-director of Apple Records – From “All You Need Is Love: The Beatles in Their Own Words: Unpublished, Unvarnished, and Told by The Beatles and Their Inner Circle” by Peter Brown and Steven Gaines, 2024

The business problems at Apple Records […] really were horrible. The business meetings were just soul-destroying. We’d sit around in an office, and it was a place you just didn’t want to be, with people you didn’t want to be with. There’s a great picture that Linda took of Allen Klein, in which he’s got a hammer like Maxwell’s silver hammer. It’s very symbolic. And that’s why we have the little nod and a wink in the middle section to “You Never Give Me Your Money”, in the lines “I never give you my pillow / I only send you my invitations”

Paul McCartney – From “The Lyrics: 1956 to the Present“, 2021

EMI-Beatles still working it out

THE BEATLES’ United States Royalty contract with Electric and Musical Industries (which Beatles’ business manager Allen Klein claims he has “renegotiated” with Capitol (EMI’s American off-shoot) still awaits the autographs of Paul-John-George-and-Ringo. But this a small detail to Mr Klein, who stands to gain 20 p.c. of the increases written into the new royalty agreement.

A director of Capitol, speaking from Hollywood, yesterday confirmed that “a preliminary agreement has been reached.” As reported in The Daily Telegraph yesterday, the Beatles will get 56-58 cents on the retail price of each album (old and new) for the next three years. From 1972-1976 (when their recording contract with EMI expires) they will get 72 cents. This providing they make two LPs a year.

Capitol, which has since 1964 made and sold the Beatles’ records for EMI under its own label in the United States, might soon be distributing only Beatles records made by Apple Records Incorporated — the American branch of the Beatles’ organisation. In 1968 — after the formation of Apple Corps — both EMI and Capitol struck “Apple” labels in their records to humour the Beatles. Now, it seems EMI is willing to go even further to keep the Beatles’ product on its profits account.

EMI believes LPs will outsell singles by 80 p.c. to 20 p.c. in value of turnover by the early 1970s on both sides of the Atlantic. The Beatles’ recent double album sold 2 million sets in the United States at around $4.85 each — while singles in 1968 — “Lady Madonna,” and “Hey Jude,” sold around 1¾ million and 4 million respectively. The Beatles themselves are conservatively estimated to have scored 292,300,000 sales of singles (including tracks on LPs) for EMI since the beginning of Beatlemania.

Between 1964 and 1967 the Beatles made a big contribution to EMI’s fortunes. The Beatles, managed by Mr Klein, want to be masters of their own empire. EMI can afford to be generous for as long as the Beatles keep spinning sales in their millions, EMI’s smaller percentage share will be of a larger cake.

From The Daily Telegraph – September 6, 1969

Beatles to sign new recording contract

A new recording contract between the Beatles and Britain’s giant recording concern EMI will, I understand, be signed next week.

Under the deal, which will apply to all new Beatles records including their new album Abbey Road to be released next week, the Beatles will get a substantial increase in royalties in return for a guaranteed number of record releases a year.

The agreement was, it is understood, negotiated between Mr. Ken East, managing director of EMI Records, and Mr. Allen Klein, the Beatles’ business manager.

Earlier this year he told me that a new recording deal for the Beatles was his No. 1 objective. Their present agreement with EMI was negotiated by their late manager Brian Epstein, and expires in 1975.

Included in the new contract is a proviso that a second increase in royalties negotiated for 1972 will only apply if their albums continue to sell over half a million copies.

From Evening Standard – September 16, 1969

Going further

The Beatles Diary Volume 1: The Beatles Years

"With greatly expanded text, this is the most revealing and frank personal 30-year chronicle of the group ever written. Insider Barry Miles covers the Beatles story from childhood to the break-up of the group."

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